OPINION ENTERED: JANUARY 16, 2009
CLAIM NO. 06-00341 & 05-00151
ZURICH-AMERICAN INSURANCE COMPANY PETITIONER
VS. APPEAL FROM HON. DONNA TERRY,
ADMINISTRATIVE LAW JUDGE
ANGELA JEFFERS, ADMIN FOR PATRICK
JEFFERS, DECD; SUSIE BELL, ADMIN FOR
WILLIAM BELL, DECD; MYERS COMPLETION, INC;
JOURNEY OPERATING, LLC;
HON DONNA TERRY, CALJ RESPONDENTS
REVERSING AND REMANDING
* * * * * *
BEFORE: GARDNER, Chairman, COWDEN and STIVERS, Members.
STIVERS, Member. Zurich-American Insurance Company (“Zurich”) appeals from the award and order entered on June 24, 2008 of the Hon. Donna Terry, Chief Administrative Law Judge (“CALJ”) ruling upon the motion to reopen filed by Journey Operating LLC (“Journey”). The award and order amended the CALJ’s opinion and award entered February 19, 2007 to the extent Zurich was ordered to continue benefit payments pursuant to a policy Zurich issued providing workers’ compensation coverage to Myers Completion, Inc. (“Myers”) for workers’ compensation claims payable pursuant to Tennessee law. The CALJ also overruled Zurich’s motion for costs against KEMI and directed Zurich to show cause why, pursuant to KRS 342.310, costs should not be imposed against Zurich.
At the BRC the parties agreed to submit this matter to the CALJ without additional proof and the parties thereafter submitted briefs on the following issues: “1) whether the ALJ has jurisdiction to decide the issues raised in reopening; 2) whether Zurich is estopped from denying liability for amount of benefits payable under Tennessee law; and 3) whether any costs shall be assessed.”
The facts of this case are well known to the parties and the Board and only that evidence relevant to the decision of the CALJ will be summarized herein. This claim was initiated by Angela Jeffers, widow of Patrick Jeffers (“Jeffers”), and Susie Bell, widow of William Bell (“Bell”), after both men were killed in an explosion in Bulan, Kentucky, while in the employ of Myers. At the time Jeffers and Bell were killed in the explosion they were servicing a well owned by Journey Operating LLC (“Journey”).
There is no dispute as to the facts leading up the deaths of both men. Myers is in the business of maintaining oil and gas wells. Jeffers and Bell worked almost exclusively in Kentucky on Journey’s wells located in Bulan, Perry County, Kentucky. The testimony revealed Jeffers and Bell would leave Tennessee early Monday morning to go to Kentucky and not return from Kentucky until Friday night. Myers did not have an office in Kentucky and did not have substantial contact with Kentucky other than to do the work for Journey. Bell and Jeffers were Tennessee residents hired by Myers in Tennessee. The widows of Bell and Jeffers filed a claim against Myers and Journey, as an up the ladder contractor as defined in KRS 342.610(2), seeking payment of benefits pursuant to the workers compensation laws of Kentucky. Initially, the sole issue before the ALJ was whether Myers’ policy extended workers’ compensation coverage for the death of Jeffers and Bell pursuant to Kentucky law and if Myers did not have coverage pursuant to the policy issued in Tennessee, was Journey liable, as an up the ladder contractor, for all benefits owed to the Estates of Bell and Jeffers.
During the course of the initial litigation the deposition of Sherrie Clemmons, Teresa Bowman and Mark Levine were taken and introduced in the Jeffers case and later in Bell’s claim. Because portions of that testimony are relevant to the ALJ’s determination, upon reopening, portions of it will be summarized herein.
Sherrie Clemmons (“Clemmons”) is employed by St. Paul’s Travelers (“Travelers”) as an insurance underwriter. She underwrites new business Traveler’s receives from the Tennessee workers compensation insurance plan. Travelers is a third party administrator writing workers compensation for Zurich-American which issued Myers’ Tennessee workers compensation policy. She testified she received a call from Teresa Bowman, Travelers’ claims adjuster who initially handled the claim for Zurich-American. Teresa Bowman told her she was requesting payment of benefits based on Tennessee law. Clemmons was aware the accident occurred in Kentucky. After an investigation, Travelers determined the employer was based in Tennessee and both deceased employees were Tennessee residents and had been hired in Tennessee. Clemmons determined, because the contract for hire was in Tennessee, the widows were entitled to Tennessee benefits. She admitted she and her supervisor did not consult the policy language nor with Mark Levine, coverage counsel with St. Paul Travelers. No demand was made upon Clemmons or her office for benefits to be paid pursuant to Kentucky law. Clemmons acknowledged certain benefits were paid to Jeffers’ Estate pursuant to Tennessee law. In the course of Clemmons’ deposition, Myers’ Tennessee Workers’ Compensation policy and all other documents relating to the policy were included as exhibits.
Teresa Bowman (“Bowman”) is employed by St. Paul Travelers Insurance Company and works in Brentwood, Tennessee, as a claims adjuster in the investigative unit. She indicated if there is a questionable claim, the investigative unit gets the claim and determines if it is compensable. Zurich-American wrote a workers’ compensation policy providing workers compensation coverage based on Tennessee law since Zurich-American participated in the Tennessee Worker’s Compensation pool. Bowman confirmed Jeffers was a Tennessee resident and hired in Tennessee. Myers was a Tennessee corporation but the fatalities had occurred in Kentucky. She did not have anything to do with issuing checks after she accepted the claim as compensable under Tennessee workers’ compensation law. Once Bowman determined Myers had Tennessee coverage, she transferred the claim to the office in Orlando, Florida. As a result she contacted Sherrie Clemmons. Bowman acknowledged she received an e-mail indicating there was a note from the underwriting office which said it had confirmed Tennessee coverage for William Bell and Patrick Jeffers on the date of loss. From looking at her computer system, she noted checks were issued for the total medical benefits. A check was issued for $7,500 for funeral expenses to the funeral home and there were various other checks issued and sent to Mrs. Jeffers in the latter part of 2004 through February of 2005. Bowman could not determine whether the benefit checks issued to the widow were cashed. She testified no one made a demand upon her to pay benefits pursuant to Kentucky law in addition to Tennessee law.
The deposition of Mark Levine (“Levine”), managing counsel, in the crime/legal department with Travelers, was also introduced. He indicated one of his jobs was to provide legal support to Travelers’ residual market divisions, that part of the company that handles workers compensation for insureds who cannot get coverage in a voluntary market as in this case. He indicated he has held this position for ten years. Levine acknowledged he was specifically consulted as to whether benefits should be paid in the Bell claim. He explained Myers obtained workers’ compensation coverage through the Tennessee assigned risk plan. He explained how that pool operated and how all carriers who write workers’ compensation policies in the state of Tennessee must participate in the pool and take their pro rata share of those individuals seeking workers’ compensation coverage through the pool. In this case, Zurich-American opted to take a direct assignment of this insured rather than participate in the pool. Zurich then contacted Travelers Indemnity Company to service the “rejected risk business” in Tennessee. As a result Travelers would traditionally handle the claims as they came in and would totally service the policy through claims service, audit loss prevention and engineering. Levine had reviewed the Tennessee policy and indicated the key provision in that policy was the Tennessee limited other states endorsement. He explained in the assigned risk world, every state, that is not self-administered, has a residual market that has done away with part 3 of the original policy and replaced it with this separate endorsement.
Levine was consulted as to whether any Kentucky benefits should be paid to the Estates of Bell and Jeffers. After learning the facts, he recommended the Kentucky claims be denied by Zurich because there was no coverage in Kentucky and Zurich did not have the ability to pay Kentucky benefits under the Tennessee limited other states endorsement which replaced part 3 of the policy. Levine testified he was not asked, if, in addition to paying benefits pursuant to Tennessee workers’ compensation law, Zurich should also pay benefits pursuant to Kentucky workers’ compensation law. He believed the question posed to him was: Can Travelers pay Kentucky benefits to Mrs. Jeffers? Levine indicated in a direct assignment policy other states cannot be added to section 3(a), which sets forth the states for which the policy provides coverage. In this case, Tennessee was a stand alone state and the policy would only provide coverage for employers with Tennessee workers’ compensation exposure.
Levine indicated the controlling provision in this case was contained in part 3 of the Tennessee limited other state’s endorsement, specifically the following provision:
A. How this insurance applies:
1) An Item 3.A. Employer is eligible for extra-territorial coverage for any state not listed in Item 3.A. of the Information Page if:
a.) The work is being performed by Item 3.A. Employees; and
b.) The duration of the work being performed in a state not listed in Item 3.A. of the Information Page does not exceed 90 days; and
c.) The workers compensation laws of that other state do not require the employer to secure separate coverage prior to beginning operations in that state.
2) We will pay promptly, when due, the benefits required of you by the workers compensation law of any state not listed in Item 3.A. of the Information Page, but only if the claim for such benefits involves work performed by an Item 3.A. employee.
Based on that language, Levine did not believe coverage pursuant to Kentucky law was available because the work performed by the employees at the time of the injury exceeded 90 days and because Myers was required to have a policy of insurance in Kentucky. Since Myers was conducting a significant amount of business in Kentucky and had more than one employee working in Kentucky, the whole time it was in Kentucky, he believed there was no coverage under the policy issued by Zurich, or that at least Travelers did not have the ability to pay Kentucky benefits. Levine did advise Zurich to provide a defense with a reservation of rights. Levine emphasized Zurich does not write this policy and “all Zurich would do is issue the policy as bound by the plan administrator.”
Levine did not recommend Zurich pay benefits to Jeffers’ widow pursuant to Kentucky law. It could, however, pay benefits pursuant to Tennessee law. He emphasized there is a “distinction as to payments made under a claim under the laws of Tennessee versus a claim made under the laws of Kentucky.” He emphasized the “policy tells the employer that you have Tennessee coverage for any claims made against you in Tennessee.”
The ALJ, after discussing the testimony, entered an opinion and award, dated February 9, 2007, the relevant portions of which are as follows:
. . . These facts lead inescapably to coverage under the Kentucky Workers’ Compensation Act. The principal question is which employer and which carrier is responsible for payment of those benefits.
In this case, Angela was offered benefits from Zurich-American pursuant to its Tennessee policy. Zurich-American admits its liability for payments pursuant to Tennessee law but contests its liability for any additional benefits payable under the Kentucky Workers’ Compensation Act.
. . .
After careful consideration of the testimony presented herein by various witnesses concerning the facts surrounding issuance of the Tennessee policy, and upon consideration of the terms of that policy, the Administrative Law Judge finds that Zurich-American does have liability for payment of benefits pursuant to Tennessee workers’ compensation law arising from Patrick’s work-related death under the terms of its Tennessee policy. However, the express provisions of the policy and its Tennessee Limited Other States Endorsement establish that the policy does not provide unlimited coverage under the laws of other states for employees of Tennessee employers who work and are injured in other states.1
. . .
. . . At any rate, the policy purchased by Melvin contains the Tennessee Limited Other States Endorsement which provides only limited coverage for Tennessee employees injured or killed in another state who elect to file for benefits in the other state. As noted by Mark Levine, an insurance policy merely states what it covers and does not advise an employer what he needs. That is the job of the employer’s insurance agent, who represents the employer, not the carrier or plan administrator.
The Administrative Law Judge finds that, pursuant to the policy terms, Zurich-American has liability for benefits awarded under the Tennessee workers’ compensation system, but is not liable for payment of benefits awarded under Kentucky’s Workers’ Compensation Act. Since Patrick is entitled to benefits under Kentucky law, the next step is to determine who is responsible for payment of benefits pursuant to KRS 342.750.
Under KRS 342.610, every employer in Kentucky is required to maintain workers’ compensation insurance covering work-related injury, occupational disease, or death. In the event that an employer has not secured workers’ compensation insurance coverage, “up the ladder” liability may be imposed if the employer without coverage is deemed to be a subcontractor pursuant to KRS 342.610(2). A person or entity which contracts with another to have work performed “of a kind which is a regular or recurrent part of the work of the trade, business, occupation, or profession” may be held liable for benefits arising from an injury or death of the subcontractor’s employee.
No representatives of Journey testified in this proceeding. However, the undisputed evidence establishes that Journey owns a substantial number of oil and gas wells in Kentucky and that, according to Melvin Myers, Journey is engaged in the business of producing and selling oil and gas from those wells. Melvin testified that his work in providing service and maintenance for the wells was a regular and ongoing part of that enterprise. This unrebutted testimony establishes that Myers’ well service and repair was a regular and recurrent part of Journey’s regular business of producing and selling oil and gas. Therefore, in the absence of compensation secured by Myers, Journey is a deemed contractor pursuant to KRS 342.610(2)(b) and is liable for compensation for the February 11, 2004 injury.
. . .
KRS 342.670 provides that income and medical benefits paid by an employer under another jurisdiction’s workers’ compensation law on account of any injury or death shall be credited against the benefits to which the employee would have been entitled had the claim been made solely in Kentucky. Thus, while Journey’s workers’ compensation carrier shall be responsible for payment of income benefits provided in KRS 342.750(6), it shall be entitled to a credit for benefits paid and owing under the Tennessee policy issued to Myers by Zurich-American or its subsidiary. Angela is not seeking, and is [sic] entitled to, double recovery and credit shall be given for income benefits and for the $7,500 lump sum payment received by Angela and the dependent children from Zurich-American.
Accordingly, the ALJ then ordered Journey/KEMI to pay weekly benefits and a death benefit to the recipients of the Jeffers and Bell estates pursuant to Kentucky law. Journey/KEMI was allowed a credit for any sums paid by Zurich.2 Journey/KEMI was also ordered to pay any unpaid related medical expenses. Zurich was not ordered to pay any benefits.
In a petition for reconsideration filed by Journey, it requested a reconsideration of the findings but also requested the ALJ to set out the credit to which Journey is entitled in the event the award was affirmed including a credit for the $322.05 being paid weekly by Zurich pursuant to Tennessee law. The ALJ, in the order ruling on Journey’s petition for reconsideration, acknowledged that Journey was seeking a specific monetary credit for benefits paid pursuant to the Tennessee policy. The ALJ pointed out the amount of payments under the Tennessee policy will change and vary with time as children become emancipated and in the event of remarriage. Accordingly, the ALJ overruled Journey’s request because the award provided for credit for benefits paid and owing and therefore was “sufficient protection and explanation of Journey’s rights and responsibilities.”
In an opinion entered November 8, 2007, this Board affirmed the decision of the ALJ. No appeal was taken from the Board’s opinion and the award became final. Subsequently on February 29, 2008, Journey filed a motion to reopen, relying upon Wheatley v. Bryant Auto Service, 860 S.W. 2d 767 (1993), alleging it was granted a credit for other benefits paid under the laws of another state and representatives of the insurance carrier for Myers “freely and repeatedly stated in sworn proceedings and in pleadings that they were liable for benefits to plaintiff for claims made under Tennessee law.” Journey pointed out Teresa Bowman of Zurich testified benefits were paid consisting of funeral benefits of $7,500 and $373.34 weekly from the accident date. Ms. Bowman also testified the policy affords Tennessee benefits. In addition, Journey noted the ALJ’s order ruling on Journey’s petition for reconsideration stated “the award provides for credit for benefits paid and owing and this provides sufficient protection and explanation of Journey’s rights and responsibilities.” Journey also referenced that portion of the Board’s opinion dealing with Journey’s request for remand to the ALJ for her to specifically grant it a credit for the lump sum payment and periodic payments made by Zurich. Journey also alluded to page 10 of the ALJ’s decision, recited herein, which stated Zurich admitted its liability for payments pursuant to Tennessee law. Journey alleged shortly after the Board’s decision became final Zurich reversed its decision claiming it owes no further payments under Tennessee law. Since Zurich’s actions affect the credit to which Journey is entitled, Journey filed the motion pursuant to Wheatley, supra, on the grounds Zurich is estopped from denying liability for benefits it admitted it owes. Journey asserted Zurich clearly owes benefits pursuant to Tennessee law and thus Zurich should be required to pay benefits pursuant to Tennessee law. It maintained this is explicitly what the ALJ and Board authorized. Further, Journey asserted the actions by Zurich clearly violated multiple sections of the Kentucky Unfair Settlement Practices Act and KRS 342.310. Journey sought an order, pursuant to Wheatley supra, directing that the credit to which it is entitled includes benefits Zurich owed or owes under Tennessee law because Zurich is now estopped from denying its liability.
Zurich responded by denying Journey’s allegation it violated the Kentucky Unfair Settlement Practices Act. Zurich further asserted the ALJ did not have jurisdiction over this dispute and Journey cannot be granted the relief it demanded. Zurich pointed out Tennessee law includes an election of remedy doctrine. Since the widows were awarded benefits pursuant to Kentucky law, Zurich’s obligation to continue paying benefits under Tennessee law terminated. Zurich asserted Tennessee law operated to completely terminate its obligation to continue paying benefits pursuant to Tennessee law when benefits are awarded in another jurisdiction. Zurich did not deny it had an obligation to provide benefits pursuant to the policy it issued. However, it pointed out, the policy did not obligate Zurich to continue paying benefits after the widows elected to pursue claims in Kentucky and were awarded benefits. Zurich asserted Journey and its insurer have no standing to request a reopening and the ALJ cannot find Zurich is estopped from refusing to pay benefits under Tennessee law. Journey would have to pursue an enforcement action under Tennessee law.
Subsequently an order was entered by the CALJ sustaining the motion to reopen.
After briefs were submitted the CALJ then entered the following findings of facts and conclusions of law:
At the Benefit Review Conference, Zurich challenged the jurisdiction of a Kentucky Administrative Law Judge to decide the issues raised in this reopening. It points to KRS 342.305 which provides that an agreement or decision may be enforced in a circuit court, and it contends that this is an enforcement action which must be filed in Perry Circuit Court, the county in which the deaths occurred. However, an Administrative Law Judge is granted the authority under KRS 342.325 to decide all questions arising under Chapter 342. This reopening does not arise from a simple attempt to enforce a judgment, but rather seeks a determination of whether Zurich committed constructive fraud due to its numerous representations during this litigation and whether it should be estopped from denying liability based upon those representations.
Zurich’s
belief further contends that there was no ground for the April 14,
2008 Order reopening this claim, as the allegations did not
constitute a “mistake” pursuant to KRS 342.125. However,
this is exactly the type of “mistake” contemplated in Messer
v. Drees,
382 SW 2d 209 (Ky. 1964). Further, there is an element of
constructive fraud in Zurich’s actions in this claim since its
conduct, while not actually fraudulent, has all the consequences and
legal effects of a fraudulent action. See Kendrick
v. Bailey Vault Co., Inc. 944 SW 2d 147 (Ky.App. 1997). Thus, the Administrative Law Judge
find that this matter was appropriately reopened on either or both of
the grounds of mistake or constructive fraud.
It is further found that Zurich litigated matters regarding entitlement to benefits to a final conclusion and did not contest or appeal its ongoing ability for payment of benefits under the Tennessee policy. Indeed, its witnesses admitted liability and it continued to voluntarily pay those benefits during the entire pendency of the subject claim litigation.
The findings made by this Administrative Law Judge in the February 19, 2007 Opinion and Award regarding Zurich’s liability for continued payment of benefits under the Tennessee policy have become final and are res judicata on the parties. Further, Zurich is precluded by the sister doctrine of collateral estoppel to re-litigate that issue, as it had full opportunity to do so in the underlying claim litigation. The Administrative Law Judge notes that there was privity of both parties and interests in the underlying claim and that the doctrine of collateral estoppel precludes redundant litigation of the issue of Zurich’s liability for continuing benefit payments under the Tennessee policy. See, 17 Couch on Insurance, Section 239:34 (3rd Ed. 2006).
The Administrative Law Judge further finds that the doctrine of equitable estoppel is applicable in this case to prevent Zurich from denying its liability for ongoing benefit payments. As noted in Akers v. Pike County Board of Education, 171 SW 3d 740 (Ky. 2005) by the Kentucky Supreme Court:
Under the doctrine of equitable estoppel, certain conduct by a party is viewed as being so offensive that it precludes the party from later asserting a claim or defense that would otherwise be meritorious . . . . In other words, it serves to offset the benefit that the offending party would otherwise derive from the conduct . . . . An equitable estoppel is permitted when the estopped party is aware of material facts that are unknown to the other party and then engages in conduct, such as acts, language or silence, amounting to a representation or concealment of the material facts. The conduct is performed with the intention or expectation that the other party will rely upon it, and the other party does so to its detriment.
In this proceeding, Zurich was aware of material facts (its plan to terminate benefits under an alleged election of remedies doctrine) which were unknown and undisclosed to the other parties or to this Administrative Law Judge. Rather, its conduct during the entire claim[,] litigation and appeals process represented that it would continue to pay benefits pursuant to the Tennessee policy. The remaining parties were not afforded any opportunity to address this undisclosed plan of action by Zurich and the Administrative Law Judge was not afforded an opportunity to make a decision which included that denial of benefits. All parties relied upon Zurich’s representations to their detriment in the Kentucky proceeding. Therefore, Zurich shall be estopped from denying its liability for continued payment of benefits pursuant to its Tennessee policy.
Accordingly the CALJ sustained Journey’s motion to reopen and granted Journey a credit for amounts Zurich has paid or in the future will be obligated to pay to the Bell and Jeffers estates. The CALJ directed Zurich to continue making payments pursuant to the Tennessee policy and required it within ten days following the date of her order, to tender a statement, to her and all parties, of the bi-weekly amounts which Zurich is obligated under the Tennessee policy to pay in both claims. The ALJ also required Zurich, within ten days following the date of her order, to show cause why costs should not be imposed against it, pursuant to KRS 342.310, for defending the matter without reasonable grounds. Zurich’s petition for reconsideration was summarily overruled.
On appeal, Zurich alleges the CALJ acted outside her powers and lacked the authority to order Zurich to reinstate benefit payments that otherwise would be payable by operation of Tennessee law. Zurich asserts that none of the grounds upon which a claim can be reopened, pursuant to KRS 342.125, are present and therefore a motion to reopen was not the appropriate remedy. Journey’s only remedy would be to file a motion to enforce in Tennessee, or in the alternative, in the Perry Circuit Court. Zurich asserts it properly terminated benefits by operation of Tennessee law and such an action is not grounds, under KRS 342.125, for Journey to pursue this reopening. There is no evidence of mistake or constructive fraud because benefit payments to the widows were terminated by operation of Tennessee’s election of remedies doctrine and the CALJ had no authority to interpret Tennessee law and decide whether Zurich had properly terminated benefits. Zurich also asserts KRS 342.125 does not authorize reopening to clarify an award and certainly mistake is not a proper ground to reopen when the award was correct under the facts which existed when it was rendered citing Whitaker v. Hall, 132 S.W. 3d 816 (Ky. 2004). Zurich asserts the case sub judice is analogous to the facts presented in Custard Insurance Adjusters Inc. v. Aldridge, 57 S.W. 3d 284 (Ky. 2001). Citing Wolf v. Fidelity & Casualty Insurance of New York, 979 S.W. 2d 118 (Ky.App. 1998) Zurich posits since the rights of the employee are not at stake and the dispute is purely between two insurance carriers such issues are beyond the purview of and authority vested in the CALJ. The CALJ’s finding that Zurich was precluded by the doctrine of equitable estoppel from terminating benefits pursuant to Tennessee law was clearly erroneous. Tennessee has an election of remedy doctrine which directs that the claimant entitled to benefits by operation of Tennessee law who elects to pursue workers’ compensation in another jurisdiction forfeits his right to benefits under Tennessee workers’ compensation law. Accordingly, Zurich properly terminated all benefit payments to the widows when the opinion and award in Kentucky became final.
Journey asserts because of Zurich’s constructive fraud, the ALJ and the parties were “under an erroneous mistake of fact” and those circumstances therefore constitute a proper basis for reopening as set forth in KRS 342.125 (1) and (3). Given these facts, the CALJ, pursuant to Wheatley, could reopen the claim. Since the CALJ had jurisdiction to decide the issue of credit in the original litigation, Zurich’s fraud by making assertions with respect to the credit issue authorized the reopening and the CALJ’s most recent opinion, award and order. Journey also asserts the principle of res judicata prohibits the presentation of the argument Zurich could rightfully terminate benefits under Tennessee’s election of remedies doctrine recognized by the Tennessee courts. Journey also alleges Zurich is collaterally estopped from making this argument based on the CALJ’s previous decision.
Since the question before us is therefore an issue of law, on appeal the decision of the ALJ is subject to de novo review. KMR v. Foremost Insurance Group, 171 S.W. 3d 751 (Ky.App. 2005); Edwards v. Carlisle, 179 S.W. 3d 257 (Ky.App. 2004); 3D Enterprises v. Metro Sewer Systems, 174 S.W. 3d 440 (Ky. 2005); MGA Insurance Co. Inc. v. Glass, 131 S.W. 3d 775 (Ky.App. 2004).
Having reviewed the record and applicable law, we believe the ALJ did not have the authority to reopen the case and order Zurich to pay benefits pursuant to Tennessee law and therefore reverse. In Wheatley, supra relied upon by the ALJ and Journey, the ALJ found a claimant to be permanently occupationally disabled but erroneously granted benefits for a period not to exceed 425 weeks. The Supreme Court found the ALJ was not acting improperly and in the interest of justice could avail himself of the statutory authority set out in KRS 342.120 to correct the acknowledged mistake regarding the duration of the award of benefits. In the case sub judice there is no mistake nor does there appear to be any fraud. The ALJ initially determined Zurich did not provide coverage for Myers for the workers’ compensation claims asserted in Kentucky, and pursuant to KRS 342.610(2), Journey was responsible for benefits as an “up the ladder” contractor. Part and parcel of that determination by the ALJ was that Myers did not have coverage for workers’ compensation claims asserted in Kentucky. Clearly the testimony of Travelers’ three employees merely established Zurich had accepted the claim as compensable in Tennessee and pursuant to Tennessee law had paid benefits. The testimony of the three employees does not establish Zurich will continue to pay benefits indefinitely based on Tennessee law. Further, the ALJ had no jurisdiction and authority to order Zurich to pay Tennessee benefits to the widows based on Tennessee law.
Although not germane to the outcome of the case sub judice, we point out a review of the cases cited by Zurich regarding the doctrine of the election of remedies relative to Tennessee workers’ compensation claims establish Zurich rightfully terminated payment of benefits due pursuant to Tennessee law. Clearly, those cases hold that once a worker asserts a claim in another jurisdiction that worker, in most circumstances, is precluded from asserting a workers’ compensation claim in Tennessee. In the case of Perkins v. BEK, Inc., 802 S.W. 2d 215 (Tenn. 1990) the claimant asserted a claim for benefits and received an award of benefits in the state of Virginia. The claimant then attempted to assert a claim for benefits in Tennessee. The court concluded Perkins had made an election to receive benefits under Virginia law and therefore was precluded from claiming benefits under Tennessee law. In so ruling the Tennessee Supreme Court citing Tidwell v. Chattanooga Boiler and Tank Companies, 163 Tennessee 420 43 S.W. 2d 221 (1931) stated that if an employee “has taken any affirmative action to seek recovery under the law of that state, or has voluntary, deliberately and with full knowledge of his options, accepted benefits under the laws of that state he may well be precluded by this election and may not be entitled to proceed in Tennessee.” Id. at p. 217. The court reaffirmed this same principle in Bradshaw v. Old Republic Insurance Co., 922 S.W. 2d 503 (Ky. 1996), involving a worker who first sought workers’ compensation benefits pursuant to Maryland law. Although his claim for benefits was denied in Maryland the employee then sought to assert a claim in Tennessee. The Supreme Court of Tennessee held that an employee who sustains an otherwise compensable injury in another state may be barred from receiving Tennessee benefits through operation of the doctrine of election of remedies. In that case the court again citing Tidwell supra stated:
We find that the facts here preclude relief by virtue of the operation of the doctrine of election of remedies. Bradshaw affirmatively acted to obtain benefits under Maryland law. He knew he could file his claim in Tennessee but decided, instead, to file it in Maryland because he believed, after consulting an attorney, that he would receive higher benefits.
The Supreme Court of Tennessee in the case of Eadie v. Complete Company, Inc., 142 S.W. 3d 288 (2004), again reaffirmed this same principle holding the filing of a claim in South Carolina and requesting a hearing and taking depositions in the matter, even though the claimant had filed a similar claim in Tennessee, was sufficient to constitute a binding election of remedies and therefore barred the employee’s Tennessee workers’ compensation claim.
Clearly, the case of Messer v. Drees, supra cited by the CALJ in support of her decision is not applicable since that case merely involved the reopening of a claim on the basis of change of condition and did not deal with the factual situation in the case sub judice. Likewise, the case of Kendrick v. Bailey Vault Co., Inc., 944 S.W. 2d 147 (Ky.App. 1997) cited by the CALJ is not applicable in this case. In Kendrick, the claimant entered into a settlement agreement without the benefit of an attorney and the settlement included language stating the claim was dismissed with prejudice and Kendrick waived any right to ever reopen the claim. An ALJ subsequently determined the dismissal with prejudice and waiver of reopening were not enforceable. Although the ALJ found no fraud on the part of the parties, he did find the language prohibiting a reopening and dismissing the case with prejudice was based on a mutual mistake. The Court of Appeals determined the ALJ was correct in allowing a reopening, pursuant to KRS 342.125, based on mutual mistake. Further, the court determined the opinion of the doctor that Kendrick had reached MMI and did not need additional surgery was tantamount to either intentional or constructive fraud. The court pointed out it was undisputed both sides relied upon the doctor’s opinion Kendrick had reached MMI and was 8% functionally impaired and would have restrictions for only one year. Since that opinion was clearly inaccurate, it amounted to either constructive fraud or mutual mistake but in either case Kendrick had presented a compelling case for setting aside the settlement agreement.
In this case we have no such situation. In the opinion and award of February 19, 2007, the ALJ properly determined Myers was, an uninsured subcontractor in Kentucky and therefore Journey was liable as the “up the ladder” contractor, for paying Kentucky workers’ compensation benefits. Implicit within that finding was that Zurich was not liable for the payment of workers’ compensation benefits in Kentucky. The ALJ correctly found Zurich had admitted its liability for payment of workers’ compensation benefits pursuant to Tennessee law but contested its liability for workers’ compensation benefits payable pursuant to Kentucky workers’ compensation law. That finding is consistent with the testimony of the employees of Travelers. However, the claimants chose not to assert a claim for benefits in Tennessee thereby potentially releasing Zurich of any liability to pay benefits pursuant to Tennessee law.
The opinion and award of February 19, 2007 determined Zurich was not and is not liable for payment of benefits awarded pursuant to Kentucky law. Having made that determination, the ALJ was powerless to order Zurich to pay benefits pursuant to Tennessee law and any language attempting to order Zurich to pay benefits pursuant to Myers’ policy covering Tennessee workers’ compensation claims contained within the initial award and opinion would have been surplusage and not binding. Likewise, the CALJ acted outside her authority in entering the subsequent award and order of June 24, 2008. Certainly the ALJ, in the initial award, pursuant to KRS 342.750(6), correctly granted Journey/KEMI credit for benefits voluntarily paid pursuant to the policy issued to Myers by Zurich or its subsidiary. However that language, in the initial award, cannot be interpreted as requiring Zurich to continue to pay benefits pursuant to Tennessee law as if a workers’ compensation claim had been filed in Tennessee. Under the facts of the case sub judice, the doctrine of equitable estoppel is not applicable.
Journey’s motion to reopen was merely an attempt to impose liability upon or seek contribution from Zurich. Therefore, we believe Zurich is correct in asserting Journey has chosen the wrong forum. In that regard, the case of Custard Insurance Adjuster v. Aldridge supra cited by Zurich is insightful. There the employer had two insurance carriers one each in Kentucky and Indiana. The Indiana carrier, not realizing another carrier provided coverage for a workers compensation claim in Kentucky, paid a number of medical benefits and some TTD. When the claim was filed in Kentucky, the Indiana insurance company attempted to assert a subrogation claim in the workers’ compensation proceeding. After making a determination as to the claimant’s disability, the ALJ ruled on the question of reimbursement and ordered the Kentucky carrier to reimburse the Indiana carrier for all the TTD and medical benefits it had paid. The Supreme Court reversed citing Wolfe v. Fidelity & Casualty Insurance Co., supra, and Larson’s Worker’s Compensation Law § 150.04 (1)-(2) (2001) holding, where the dispute is between two insurance carriers and does not affect the rights of an employee in a pending claim, jurisdiction does not lie with the ALJ. In such cases, because the question of reimbursement was purely a dispute between two insurance carriers over benefits that had already been paid, and resolution of the matter did not involve a provision of KRS Chapter 342 the ALJ as well as this Board did not have jurisdiction to resolve the question. Id. at p 288 & 289. Our decision is also reinforced by § 150.04[2] of Larson’s cited by the Supreme Court in Custard which reads as follows:
On the other hand, when the rights of the employee in a pending claim are not a stake, many commissions disavow jurisdiction and send the parties to the courts for relief. This may occur when the question is merely one between two insurers, one of whom alleges that it has been made to pay an undue share of an award to a claimant, and the award itself is not being under attack. Or it may occur when the insured and insurer have some dispute entirely between themselves about the validity or coverage of the policy and the sharing of admitted liability.
. . .
Similarly, once the ALJ’s initial determination on the issue of coverage and liability for payment of benefits became final, any attempt to change that determination is barred by res judicata. In the case of Whitaker v. Cecil, 69 S.W. 3d 69 (2002), after the parties settled, the employer moved for a ruling on apportionment asserting that under the most recent interpretation of the law its liability had changed. The motion was opposed by the Special Fund on the basis the settlement had been reached based upon an interpretation of the law that prevailed when the settlement was entered. The Supreme Court agreed holding that the motion to reopen should have been denied if for no other reason than on the basis of res judicata because the rights of the parties had been fully determined and litigation should end. Clearly, where there was an identity of the parties and an identity of causes of action the doctrine precludes further litigation of issues which were decided on the merits in the final judgment. Id. p. 72. The ALJ initially determined the policy issued by Zurich did not provide coverage for a workers compensation claim asserted in Kentucky and Journey was liable to the estates of Jeffers and Bell. After that determination became final the ALJ was powerless to revisit that issue at a later date.
Accordingly, the decision of the CALJ is REVERSED and this matter is REMANDED to an ALJ, designated by the acting CALJ, for entry of an order setting aside the order and award of the CALJ dated June 24, 2008 and denying Journey’s motion to reopen.
ALL CONCUR.
COUNSEL FOR PETITIONER:
HON A STUART BENNETT
P O BOX 2150
LEXINGTON KY 40588-9945
COUNSEL FOR RESPONDENT:
HON W BARRY LEWIS
P O BOX 800
HAZARD KY 41702-0800
HON KIMBERLY K VAN DER HEIDEN
P O BOX 34048
LEXINGTON KY 40588
HON MARCUS L VANOVER
117 W MOUNT VERNON ST
SOMERSET KY 42501-0783
HON PAUL F HENDERSON III
P O BOX 783
SOMERSET KY 42502-0783
ADMINISTRATIVE LAW JUDGE:
HON J LANDON OVERFIELD
CHIEF ADMINISTRATIVE LAW JUDGE
PREVENTION PARK
657 CHAMBERLIN AVE
FRANKFORT KY 40601
1 Although we cite the ALJ’s findings in Jeffers’ claim, the ALJ made the same finding in Bell’s claim.
2 At the time of her opinion and award of February 19, 2007, ALJ Terry was not the CALJ.
