OPINION ENTERED: January 16, 2009
CLAIM NO. 05-00381
ASPLUNDH TREE EXPERT COMPANY PETITIONER
VS. APPEAL FROM HON. R. SCOTT BORDERS,
ADMINISTRATIVE LAW JUDGE
BROWN LOE NEACH
and HON. R. SCOTT BORDERS,
ADMINISTRATIVE LAW JUDGE RESPONDENTS
AFFIRMING
* * * * * *
BEFORE: GARDNER, Chairman; COWDEN and STIVERS, Members.
GARDNER, Chairman. Asplundh Tree Service (“Asplundh”) seeks review of a decision on remand from the Kentucky Supreme Court rendered July 14, 2008 by Hon. R. Scott Borders, Administrative Law Judge (“ALJ”), finding the reasons offered for the untimely filing of its Form 111, Notice of Claim Denial, as inadequate to establish good cause for any delay. Asplundh did not file a petition for reconsideration before the ALJ with reference to the July 14, 2008 decision prior to this appeal.
This is the second time this case has been before the Board for review. On appeal, Asplundh characterizes the ALJ’s determination on remand as “an extremely harsh ruling,” amounting to a default judgment rising to the level of an abuse of discretion. Asplundh points out that in Kentucky, as a matter of law, default judgments are disfavored. Asplundh contends that under existing authority, the ALJ was obligated to apply a liberal standard in making a determination as to good cause, in order to insure that it was “not deprived of its day in court.” Asplundh maintains that in light of the evidence, the ALJ “applied anything but a liberal standard” and, as such, the decision on the merits below was arbitrary, unreasonable, unfair and unsupported by sound legal principles. Asplundh contends “there is not one iota of evidence that the missed time limit was willful or in bad faith.” Finally, Asplundh charges that under the “heavy handed and unduly strict standard” imposed by the ALJ, it would be impossible for any employer or insurance carrier to establish good cause for the untimely filing of a Form 111, regardless of the circumstances involved. We affirm.
On March 10, 2005, Brown Loe Neace (“Neace”), filed an application for benefits against Asplundh in which he alleged a work-related cumulative injury affecting his neck, back and wrists bilaterally that became manifest on January 2, 2005. The Executive Director (now Commissioner) of the Office (now Department) of Workers’ Claims (“OWC”) issued a notice to all parties, including a scheduling order, on March 21, 2005, which informed Asplundh that a Form 111, Notice of Claim Denial or Acceptance was due within forty-five days, on or before May 5, 2005. Asplundh tendered its Form 111 on May 18, 2005, after which Neace objected on the ground that it was untimely.
In response, Asplundh took the deposition of David Michael Cutchin (“Cutchin”), a claims case manager with Liberty Mutual Insurance Corporation (“Liberty Mutual”). Cutchin confirmed that Liberty Mutual was Asplundh’s workers’ compensation insurance carrier at the time Neace filed his claim, and he was the principle adjuster responsible for that claim. Cutchin stated he was out of the office on March 21, 2005, when the scheduling order in Neace’s claim was issued by the OWC. Cutchin testified he was on short term disability leave at the time, undergoing a bilateral hip replacement which had become necessary as a result of complications from cancer treatment. Cutchin confirmed that due to the surgery he was away from work for a period of seven weeks, spanning February 9, 2005 through May 31, 2005.
Cutchin stated he initially returned to work on April 1, 2005, working half days for the next two weeks. He then worked three-quarter days for an additional two weeks, before resuming full time duty. Cutchin testified that upon returning to Liberty Mutual, he initially spent his time trying to catch up on work that had accumulated in his absence. Cutchin testified that, as a result, he did not become aware that a scheduling order had been issued in Neace’s case until May 11, 2005, at which time he immediately forwarded the case file to an attorney.
Cutchin testified that during the period in question, Liberty Mutual employed between thirty to fifty claims adjusters at his office location, as well as “a lot of support personnel.” Cutchin described Asplundh as one of liberty Mutual’s substantial accounts, representing a minimum threshold in premiums of more than $1,000,000. Cutchin testified that at Liberty Mutual, he worked as part of a team of three case managers whose work was overseen by two senior case managers. Cutchin further testified that his manager would have been responsible for directing and communicating with the rest of his team concerning the handling of his case load and assignments in his absence.
In the original decision on the merits rendered October 17, 2005, citing Gray v. Trimmaster, 173 S.W.3d 236 (Ky. 2005), the ALJ ruled that in view of Asplundh’s untimely filing of a Form 111, he was obligated as a matter of law to find all allegations set out in Neace’s application for benefits as deemed admitted by the parties, leaving extent and duration of disability as the only issue for determination. With regard to that remaining issue, the ALJ found Neace to be permanently totally disabled.
On appeal, the Board determined KRS 342.270(2) and 803 KAR 25:010 § 5(2), governing the procedure for adjustment of workers’ compensation claims, permits an employer to file a Form 111, Notice of Claim Denial, outside the forty-five day period mandated by the statute, and thus avoid admission of all allegations of the application, if the ALJ finds the employer has shown good cause for any such delay. On that basis, the Board vacated that portion of the ALJ’s decision deeming, as a matter of law, all allegations in Neace’s application as admitted by Asplundh and ordered the matter remanded for further consideration. On review, the Supreme Court affirmed the Board’s opinion. See Neace v. Asplundh Tree Expert Co., Inc., Nos. 2007-SC-000236-WC, 2007-SC-000268-WC, 2008 WL 1850622 (Ky. 2008). In so ruling, the court instructed:
KRS 342.270(2) states, in pertinent part as follows:
Within forty-five (45) days of the date of issuance of the notice required by this section, the employer or carrier shall file notice of claim denial or acceptance, setting forth specifically those material matters which are admitted, those which are denied, and the basis of any denial of the claim.
803 KAR 25:010 § 5 states, in pertinent part, as follows:
(2)(a) The defendant shall file a Notice of Claim Denial or Acceptance on a Form 111-Injury and Hearing Loss within forty-five (45) days after the notice of the scheduling order or within forty-five (45) days following an order sustaining a motion to reopen a claim.
(b) If a Form 111 is not filed, all allegations of the application shall be deemed admitted.
In Gray v. Trimmaster, supra, the employer failed to submit a timely Form 111, to introduce any proof, or to attend the benefit review conference. It filed a notice of representation and tendered a Form 111 after the conference. It appeared at the hearing but failed to assert a legal basis for concluding that KRS 342.270(2) and 803 KAR 25:010 § 5 did not require all allegations contained in the worker’s application for benefits to be deemed admitted. Thus, the court did not address whether a tardy Form 111 may be filed upon a showing of good cause. It focused on the effect of the worker’s allegations.
In the present case, the employer tendered a tardy Form 111 and asserted that good cause existed for the delay. The Board determined that KRS 342.270(2) and 803 KAR 25:010 § 5 did not require strict compliance with the 45-day period despite their mandatory language. It concluded that a party may obtain relief from the 45-day requirement upon a showing of good cause in the same manner that a party may obtain relief from a default judgment in a civil action.
KRS 342.270(2) requires an employer to respond within 45 days of the scheduling order and admit or deny the allegations contained in the worker’s application for benefits. It does not address the effect of a delay in doing so or a failure to do so. 803 KAR 25:010 § 5 operates as the equivalent of a default judgment provision. Its purpose is to facilitate the prompt and orderly resolution of claims.
In a civil action, CR 8.02, CR 8.04, and CR 12.01 operate to admit an averment in a pleading if the opposing party fails to answer and deny it within 20 days of service of the summons and complaint. CR 55.01 provides for the entry of a default judgment if a party fails to defend a cause of action and lists but a few exceptions. Ryan v. Collins, 481 S.W.2d 85 (Ky. 1972), notes, however, that the courts disfavor such judgments and that CR 55.02 permits the trial court to set aside a default judgment upon a showing of good cause in accordance with CR 60.02. Liberty National Bank & Trust Co. v. Kummert, 305 Ky. 769, 205 S.W.2d 342 (Ky.1947, and Howard v. Fountain, 749 S.W.2d 690, 692 (Ky.App. 1988), direct the trial court to apply a liberal standard when judging whether good cause exists and state that the exercise of discretion will not be disturbed absent abuse. Likewise, Moffitt v. Asher, 302 S.W.2d 102 (Ky. 1975), applies an abuse of discretion standard to a decision granting or denying a request under CR 6.02 to plead after the time allowed in CR 12.01 has expired.
As explained in J.B. Blanton Co. v. Lowe, 415 S.W.2d 376 (Ky. 1967), the courts afford an administrative agency’s construction of its own regulation great weight when determining the regulation’s meaning. Although 803 KAR 25:010 § 5 does not indicate that the time for filing a Form 111 may be enlarged after it expires, the claimant points to no statute or regulation that prohibits it from being enlarged despite a showing of good cause. The Board’s construction of 803 KAR 25:010 § 5 is reasonable. It considers a worker’s interest in the prompt resolution of a claim but also ensures that an employer who shows good cause for tendering a tardy Form 111 will receive a day in court. We conclude, therefore, that 803 KAR 25:010 § 5 permits an employer to file a Form 111 outside the 45-day period if the ALJ finds that it has shown good cause for the delay.
The employer asserts that Mr. Cutchin’s health problems established good cause for the delay, arguing that people must sometimes be away from the office for periods of time. Nonetheless, we are unwilling to adopt a rule that the absence of an insurance carrier’s employee due to illness necessarily constitutes good cause for a delay in filing a Form 111. KRS 342.285 designates the ALJ as the finder of fact; therefore, the claim must be remanded for the ALJ to make findings of fact that will permit a meaningful appellate review. If the ALJ determines that the employer has not shown good cause, then the allegations contained in the application for benefits are admitted. If the ALJ determines that the employer has shown good cause, the ALJ must then consider the merits of the contested issues.
Slip op at pp. 2-3.
In line with the above ruling, on remand the ALJ revisited the record with regard to whether the evidence established sufficient good cause to justify Asplundh’s delay in the filing of its Form 111. In determining that Asplundh had not shown good cause, the ALJ reasoned as follows:
The sole issue on remand is whether or not the Defendant/Employer has shown good cause for tendering a tardy Form 111. In support of their argument, the Defendant/Employer took the deposition of Mr. David Cutchin, Claims Manager for the insurance carrier for the Defendant/Employer. Mr. Cutchin has been employed by Liberty Mutual, the insurance carrier for the Defendant/Employer, for eight years as a claims adjuster. He was the adjuster assigned to handle the Plaintiff’s claim.
Mr. Cutchin testified he developed non-Hodgkin’s lymphoma and that the medication taken to treat his condition resulted in deadening his hip joints bilaterally, which necessitated a bilateral hip replacement in the spring of 2005. On March 10, 2005 the Plaintiff filed his application for benefits and a scheduling order was issued by the Office of Workers[’] Claims on March 21, 2005, giving the Defendant/Employer 45 days from that date to file a Form 111. At that time Mr. Cutchin was out of his office on short-term disability, returning to work in early April 2005. He did not discover the file or the scheduling order until approximately May 11, 2005 and immediately filed a Form 111. However, the Form 111 was filed outside of the 45 day time period.
On cross-examination, Mr. Cutchin admitted that there were 30 to 50 claims adjusters in his office, as well as support personnel. He further admitted he is a member of a team, which consists of a senior case manager, and three case managers. He admitted it would have been his case manager’s responsibility to see that his assigned claims were handled while he was on medical leave.
However, it is readily apparent his senior case manager did not see that this claim was properly handled while he was on medical leave and apparently none of his ‘team members’ nor the senior case manager, bothered to take responsibility for this claim and simply let it set [sic] on his desk until he returned from medical leave. This inaction by the insurance carrier clearly constitutes negligent claims handling on their part. As a result, the Defendant/Employer argues the medical condition of the claims adjuster, which took him out of the office for a period of time, constitutes good cause and they should be allowed to file a Form 111 out of time. They argue the insurance carrier had a sound, effective, truthful reason and something more than an excuse and therefore should be allowed to file a Form 111 out of time. The Defendant/Employer further argues the delay in filing the Form 111 of only a few days was not due to negligence or want of ordinary care or attention, or to carelessness or inattention. However, the undersigned Administrative Law Judge is not so persuaded. In fact, the undersigned Administrative Law Judge is of the opinion the inaction on [the] part of the insurance carrier clearly constituted negligence on their part and does not amount to good cause. It appears the reason Liberty Mutual has a ‘team’ concept is to prevent actions such as occurred in this case from happening.
While the results may seem harsh the undersigned Administrative Law Judge simply does not believe the negligence on the part of the insurance carrier in the adjusting of this claim amounts to good cause shown. Therefore, the Administrative Law Judge finds the Defendant/Employer and/or their insurance carrier has not shown good cause for the tardy filing of their late Form 111. Therefore, the allegations contained in the application for benefits filed by the Plaintiff are admitted.
It is from the above language that Asplundh now appeals.
We begin by noting the Board is acutely aware that default judgments as a rule are disfavored. Asset Acceptance, LLC v. Moberly, 241 S.W.3d 329, 332 (Ky. 2007); Educator & Executive Insurers, Inc. v. Moore, 505 S.W.2d 176 (Ky. 1974). That having been said, triers of fact have repeatedly been held to possess broad discretion in determining such matters. Howard v. Fountain, supra.
“Good cause” is most commonly defined as a timely showing of the circumstances under which a default judgment was procured. Green Seed Co., Inc. v. Harrison Tobacco Storage, 633 S.W.2d 755 (Ky. 1984). To set aside a default judgment, as a threshold matter, “good cause” must be shown. Jacobs v. Bell, 441 S.W.2d 448 (Ky. 1969). To establish “good cause,” the party seeking relief from a default judgment must demonstrate that it is not guilty of unreasonable delay or neglect. Terrafirma, Inc. v. Krogdahl, 380 S.W.2d 86 (Ky. 1964).
Correspondingly, as the Supreme Court has already ruled in this case, relief from the requirement for filing a Form 111 within forty-five days of the issuance of the scheduling order may only be had upon good cause shown. Neace v. Asplundh Tree Expert Co., Inc., supra. See also Clark Regional Medical Center v. Lovings, No. 2006-SC-0027-WC, 2006 WL 2987038 (Ky. 2006); Whittaker v. Morgan, 52 S.W.3d 567 (Ky. 2001). Absent a showing of good cause by an employer for the untimely filing of a Form 111, the requirement under 803 KAR 25:010 § 5(2)(b) that all allegations in a claimant’s application for benefits shall be deemed admitted is mandatory. Gray v. Trimmaster at 240; Neace v. Asplundh Tree Expert Co., Inc. at p. 3. Actual prejudice to the injured employee is not a factor under KRS 342.270(2) or 803 KAR 25:010 § 5(2). Clark Regional Medical Center v. Lovings at p. 4.
Whether good cause is adequately proven in such instances is a question of fact for determination within the discretion of the ALJ on a case by case basis, depending on the evidence presented. Neace v. Asplundh Tree Expert Co., Inc. at p. 3; Clark Regional Medical Center v. Lovings at p. 3. Regardless of the result reached, the exercise of such discretion by an ALJ can not be disturbed on appeal absent a clear showing of abuse of discretion on the part of the fact finder. Neace v. Asplundh Tree Expert Co., Inc. at p. 2. The test for abuse of discretion is whether the fact finder’s decision was arbitrary, unreasonable, unfair, or unsupported by sound legal principles. Officeware v. Jackson, 247 S.W.3d 887, 892 (Ky. 2008).
In the instant appeal, it is undisputed both Asplundh and its workers’ compensation insurance carrier, Liberty Mutual, were placed on notice by the Executive Director that a scheduling order had been issued in Neace’s claim on or about March 21, 2005. In the body of that notice, the Executive Director expressly admonished both parties of the statutory requirement that a Form 111, Notice of Claim Acceptance or Denial, be filed on the employer’s behalf within forty-five days, or else all allegations set out in Neace’s application for benefits would “be deemed admitted.” The evidence firmly establishes the failure to timely file a Form 111 was the result of Liberty Mutual’s neglect in responding to that directive, representing a lack due diligence in the adjusting of Neace’s claim. Although Cutchin’s time off from work while on medical leave arguably might excuse him personally from any culpability in this matter, it does not necessarily explain the nonfeasance of Cutchin’s senior claims manager or the other adjusters on the team responsible for handling Cutchin’s case load and assignments in his absence. Under the circumstances, we find no abuse of discretion pertaining to the outcome reached by the ALJ on remand. Given that there is substantial evidence to support the ALJ’s determination there were no extraordinary circumstances beyond Liberty Mutual’s control that effectively prevented it from timely filing a Form 111 and, therefore, no good cause shown sufficient to excuse any delay, we find no error. Special Fund v. Francis, 708 S.W.2d 641 (Ky. 1986).
Accordingly, the decision rendered July 14, 2008 by Hon. R. Scott Borders, Administrative Law Judge, is hereby AFFIRMED.
ALL CONCUR.
COUNSEL FOR PETITIONER:
HON W BARRY LEWIS
PO BOX 800
HAZARD KY 41702
COUNSEL FOR RESPONDENT:
HON MCKINNLEY MORGAN
921 S MAIN ST
LONDON KY 40741
ADMINISTRATIVE LAW JUDGE:
HON R SCOTT BORDERS
8120 DREAM STREET
FLORENCE KY 41042
