Kentucky Employment Law Blog

Damages Recoverable under RICO for Fraudulent Deprivation of Workers Compensation Benefits

The Sixth Circuit's recent decision in Brown v. Cassens Transport, No. 10-2334 (April 6, 2012), recognized both that a claim for workers compensation benefits as well as the expectation of a fair process for a workers compensation claim were "property" under RICO. This is the second time that the Sixth Circuit has reversed a district court's dismissal of the case. It has been the subject of to prior post on the Kentucky Employment Law Blog: A Claim for Workers Compensation Benefits Is Property Under RICO, Sixth Circuit Rules and Injured Workers May Sue Under Racketeering Law Based On Scheme To Deny Them Workers Compensation Benefits.

The court also explained the determination of damages that could be recovered under RICO for the fraudulent deprivation of workers compensation benefits:

... a person is injured and "property" under RICO when the value of the statutory benefits that she receives is artificially decreased by reason of the fraud complained of. "The compensable injury necessarily is the harm caused by predicate acts sufficiently related to constitute a pattern." Calculating such differences is rarely an exact science, but the plaintiffs should be able to put on proof of how much compensation they would have received under the [Michigan workers compensation law's] rigid schedule of compensation but for the defendants' allegedly fraudulent medical testimony. The difference between that amount and the amount they received in settlement is neither speculative nor too difficult to surmise.

Robert L. Abell
www.RobertAbellLaw.com

A Claim for Workers Compensation Benefits Is Property Under RICO, Sixth Circuit Rules

A claim for workers compensation benefits is property under RICO, and injury to that property is properly sued for under the statute. This ruling by the Sixth Circuit in Brown v. Cassens Transport, No 10-2334 (April 6, 2012), is the latest development in a very interesting suit claiming that an employer and a doctor it recruited systematically diminished the value of injured workers claims for workers compensation by means of fraud. The Sixth Circuit's prior ruling, Brown v. Cassens Transport, No 05-2089 (Oct. 23, 2008), was previously discussed on the Kentucky Employment Law Blog: Injured Workers May Sue Under Racketeering Law Based On Scheme To Deny Them Workers Compensation Benefits.

The plaintiffs claim they were injured on the job for Cassens. Cassens self-insures its workers compensation and contracts with Crawford & Company for claims administration. The plaintiffs claim that Cassens and Crawford solicited "fraudulent medical reports" from a third defendant, Dr. Saul Margules and used them as a fraudulent means to diminish the value of the plaintiffs' claims for workers compensation benefits. Interestingly, all of the plaintiffs but one had settled their workers compensation claims with Cassens; the other was subject of an undisclosed adjudication in the Michigan workers compensation scheme.

Reversing a dismissal by the district court for the second time the Sixth Circuit held "that the plaintiffs have alleged an injury to property because they allege the devaluation of either their expectancy of or claim for workers' compensation benefits." First, the court ruled that "applicants for workers' compensation benefits have a property interest in those benefits at the time that their employer becomes aware of the injury." This holding rests on language in the Michigan workers compensation law stating that "employees injured in the course of employment 'shall be paid compensation,' which is calculated according to a rigid schedule." The court rejected the argument that a property interest in the benefits did not accrue until the injured worker had proved their entitlement noting that "Michigan state law does not require injured employees to make such an initial showing before they receive benefits."

Second, the court further held that even if the expectation of workers compensation benefits is not a property interest, "the plaintiffs in this case may proceed by alleging injury to property in that their claim to benefits under the workers compensation scheme was damaged by the defendants' actions." Citing a prior Michigan decision, Williams v. Hofley Mfg. Co., 424 N.W.2d 278 (Mich. 1988), the court observed "the plaintiffs' claim is not necessarily about particular payments themselves, but also about the defendants' deception ... that deprived the plaintiffs of the ability to assert their claim for benefits under the statute in a fair forum."

Finally, the Sixth Circuit rejected the argument that an unfavorable adjudication or settlement by plaintiffs precluded their loss of a property interest, explaining as follows:

... losing or settling a case due to fraudulent medical reports does not extinguish the plaintiffs' property interest in bringing a claim free of fraud. ... plaintiffs should be allowed to proceed on their RICO claim and put on evidence that they would have received a better result in the underlying state agency proceedings had the defendants not submitted the fraudulent medical reports. The fact that the plaintiffs lost or settled in tainted proceedings is not evidence that the plaintiffs would have lost or settled if the proceedings had been fair.

Robert L. Abell
www.RobertAbellLaw.com

Kentucky Workers Compensation ALJ May Apportion Impairment Rating

An ALJ may apportion the impairment rating for an injury in a Kentucky workers compensation case. The Kentucky Supreme Court clarified the scope of the ALJ's discretion recently in Pella Corp. v Bernstein, No 2010-SC-448-WC (April 21, 2011).

The injured worker, Joyce Bernstein suffered various injuries including shoulder injuries. She was treated for the shoulder injuries by an orthopedic surgeon, Dr. Jackson, who assigned a 10% permanent impairment rating to her shoulder injuries further specifying on the Form 107 a greater degree of impairment to the left shoulder than to the right. However, Dr. Jackson did not apportion the 10% impairment among the shoulders. Subsequently, it developed, according to testimony by Bernstein, that her right shoulder had healed.

The Supreme Court, in affirming a ruling by the Court of Appeals, ruled that, and ALJ could properly attribute more than half of the 10% impairment rating to the shoulders to the left shoulder. Toward this ruling the Court recited examples and instances of the discretion an ALJ has to select the appropriate impairment rating:

• an ALJ may consult the American Medical Association's Guides to the Evaluation of Permanent Impairment when considering the medical evidence and deciding which expert to rely upon
   
• an ALJ may rely on at least some of the conversion tables found in the Guides, such as the tables used combine whole-person impairment ratings or to convert a binaural hearing impairment to a whole-person impairment
   
• an ALJ may also translate a Class 1-5 impairment assigned to a medical condition under the Fourth or Fifth Edition of the Guides into a percentage impairment by using the last edition that equated Class 1-5 impairment with percentages

Robert L. Abell
www.RobertAbellLaw.com

Kentucky Workers Compensation Retaliation: Punitive Damages and the Jural Rights Doctrine

Terminating an employee in retaliation for filing a Kentucky workers compensation claim was ruled to constitute the tort of wrongful discharge by the Kentucky Supreme Court in Firestone Textile v. Meadows, 666 S.W.2d 730 (Ky 1984).  Subsequently, the General Assembly enacted KRS 342.197 and codified a cause of action for workers compensation retaliation.

Employers in defense to a workers compensation retaliation claim under KRS 342.197 often assert that punitive damages are not available as a remedy. That position was undermined by the recent Court of Appeals decision in Taylor v King, 2009-CA-1599 (Ky App, October 1, 2010).

The most pertinent issue in Taylor v King was whether the Kentucky Dram Shop Act, KRS 413.241, could constitutionally prohibit recovery of punitive damages against a seller or provider of alcohol. Because the Kentucky Dram Shop Act is similar to KRS 342.197, because it was enacted after significant common-law development of claims, defenses and remedies, the court's analysis is applicable to the similar issue presented with regard to claims for workers compensation retaliation under KRS 342.197.

Kentucky's jural rights doctrine "flows from a reading of sections 14, 54, and 241" of the Kentucky Constitution and "states that the General Assembly has no authority to abolish or restrict a common-law right of recovery for personal injury or wrongful death." The doctrine, the court added, applies not only to causes of action recognized at the time Kentucky's constitution was adopted in 1891 "but also to actions in remedies which have developed through the common-law since the adoption of the Constitution. Perkins v. Northeastern Log Homes, 808 S.W.2d 809, 815-18 (Ky 1991)." The court then concluded that the Kentucky Dram Shop Act had restricted the opportunity to recover punitive damages in violation of the jural rights doctrine.

A similar rationale applies to KRS 342.197. First, wrongful discharge is a tort and essentially a cause of action for personal injury. Second, the tort of wrongful discharge, like dram shop liability, is an action developed in the common-law since adoption of Kentucky's Constitution in 1891. Accordingly, a construction of KRS 342.197 that punitive damages are not a remedy would similarly violate the jural rights doctrine.

Robert L. Abell
www.RobertAbellLaw.com

Double Kentucky Workers Compensation Benefits Recoverable Where Employment Ends Due to Previous Work-Related Injuries

Kentucky workers compensation benefits may be doubled where employment ceases due to the disk enabling effects of previous work-related injuries as well as the injury being compensated, according to a ruling by the Kentucky Supreme Court in Hogston v. Bell South Communications, No. 2010-SC-299-WC (November 18, 2010).

Chester Hogston work as a lineman for BellSouth. He suffered a work injury to his right knee in the 1980s and to his left knee in 1997. In January 2006, he again sustained a work injury to his right knee.

Dr. Shockey surgically repaired right knee in March 2006 and assigned a 4% permanent impairment rating. After later unrelated surgeries, Dr. Shockey assigned a 10% impairment rating and imposed restrictions related to Hogston's left, which also later required surgery. Hogston's restrictions were because of his left knee and they eventually required him to leave his job with BellSouth.

Hogston's workers compensation claim arose from the January 2006 injury to his right knee in the 4% impairment rating assigned by Dr. Shockey. He claims that he is Kentucky workers compensation benefits should be doubled pursuant to KRS 342.730(1)(c)(2). The court noted that Dr. Shockey's testimony linked the reason for termination of Hogston's employment to a work-related disability. The Court ruled that "KRS 342.730(1)(c)(2) includes a cessation of employment due to the disk enabling effects of previous work-related injuries as well as the injury being compensated." Therefore, the Court directed that in order be entered doubling the Kentucky workers compensation benefits recoverable by Hogston. 

Robert L. Abell
www.RobertAbellLaw.com

 

Where Employer Induced Employee to Accept Employment by Subsidizing Employee's Commute, the Employee's Death While Commuting Was Compensable under Kentucky Workers Compensation Law

Typically, a worker's injury while commuting to and from work is not compensable under Kentucky workers compensation law because of the "coming and going" rule. There are some exceptions to the "coming and going" rule, one being where the employer induces the employee to accept or continue employment by substantially subsidizing the employee's commute.  The Kentucky Supreme Court recently applied this exception in Fortney v. Airtran Airways, No. 2009-SC-429-WC (June 17, 2010).

Clarence Fortney was a pilot employed by Airtran Airways. He lived in Lexington and commuted to and from Atlanta, where Airtran was headquartered. Tragically, Fortney was killed in the Comair flight 5191 crash in Lexington on August 27, 2006, while commuting to work. Airtran had an arrangement with Comair, which allowed Fortney to fly free or at the very reduced fare to and from Lexington and Atlanta. The evidence indicated that this commuting subsidy induced Fortney to accept employment with the Airtran.

The Kentucky Supreme Court, in an opinion authored by Justice Lisabeth Abramson, employed an analytical mixture of economic analysis and the benefit principle in concluding that Fortney's commute to Atlanta was in the course of his employment and his death compensable under Kentucky workers compensation law:

The fact that an employer uses transportation or transportation expense as an inducement to accept or continue employment is material to supporting compensability, particularly when the journey is sizable and when the employer pays all or substantially all of the expense. We note that such an inducement benefits the worker who accepts it and places a financial burden on the employer but also that the inducement benefits the employer when its purpose is accomplished. An employer is unlikely to provide such an inducement unless it views the resulting benefit as outweighing the burden.

Robert L. Abell
www.RobertAbellLaw.com

Injured Workers At Social Security Retirement Age Limited to Two Years Kentucky Workers Compensation Benefits, Kentucky Supreme Court Rules

Injured workers that have reached Social Security retirement age are limited to two years Kentucky workers compensation income benefits from the date of their work injury, the Kentucky Supreme Court ruled last week in Styles v. Elkhorn Truck Parts & Service, No 2009-SC-494-WC (June 17, 2010). 

Hoyle Styles was 65 years old and receiving Social Security retirement benefits when he suffered a permanently disabling work on January 18, 2006.  The Court ruled unanimously that KRS 342.730(4) terminates "all income benefits" two years after the date of injury and that "all income benefits" included "temporary total disability (TTD) benefits, permanent partial disability (PPD) benefits, and permanent total disability benefits." 

Robert L. Abell
www.RobertAbellLaw.com

Kentucky Workers Compensation Exclusive Remedy Doctrine Bars Injury Suit

The exclusive remedy doctrine in Kentucky workers compensation law limits the circumstances in which an injured employee may recover anything other than workers compensation benefits. The scope and application of the exclusive remedy doctrine was illustrated in the recent Kentucky Court of Appeals decision, Helton v. Tri-County Cycles Barbourville, No. 2009-CA-000049-MR.

Helton was a salesman for Myers Chevrolet, which was owned by Gregory Wilcheck. Myers Chevrolet owned a 50% interest in Tri-County Cycles. The weekend before Tri-County was to formally open for business Helton was riding on the back of an ATV driven by Wilcheck during a sales demonstration for a customer. Helton had signed a sales representative contract with Tri-County; he and other Myers Chevrolet employees had been working to get Tri-County ready to open for business. Wilcheck began "jacking around" while operating the ATV, doing doughnuts and eventually causing it to tip over and badly injure Helton's leg. Helton filed for and received workers compensation benefits.

Helton then filed suit in circuit court for damages against Tri-County, Myers Chevrolet and Wilcheck. The court ruled that those claims were barred by the exclusive remedy doctrine, which "shall be exclusive and in place of all of the reliability of such employer to the employee [.]" First, the court noted that Helton held business licenses to act for both Myers Chevrolet and Tri-County, which made them his joint employer. Second, the claim against Wilcheck was barred, because an injured worker may sue a co-employee for damages on account of injuries sustained in the course of employment only where the injuries are caused by a willful and unprovoked act of physical aggression, not by reckless horseplay.

Robert L. Abell
www.RobertAbellLaw.com

Recovery Workers Compensation Benefits Not Barred by Recovery of Damages From Third-Party In Personal Injury Suit

The recovery of workers compensation benefits is not barred where a worker also has recovered damages from third parties whose actions most directly caused the injuries. Workers compensation benefits, however, will be reduced to the extent and amount that they duplicate damages already recovered, so as to prevent a double recovery. This scenario is illustrated in the recent decision by the Kentucky Court of Appeals,Wal-Mart Stores, Inc. v. Wells, No. 2009-CA-001682-WC.

Donald Wells, a Wal-Mart employee, was injured by carbon monoxide exposure caused by employees of Atlas and Unarco, who were repairing a freezer. Wells received $500,000 in settlement from Atlas and 400,000 from Unarco for his personal injuries. He then pursued a workers compensation claim against Wal-Mart and was awarded $440,659.21 in income benefits in past and future medical benefits.

Wal-Mart's contention that Wells was completely barred from any recovery of workers compensation benefits was rejected as contrary to numerous prior decisions including Cincinnati Ins. Co. v. Samples, 192 SW3d 311 (Ky. 2006); AIK Selective Self Ins. Fund v. Bush, 74 SW3d 251 (Ky. 2002); and Hillman v. American Mut. Liability Ins. Co., 631 SW2d 848 (Ky. 1982).  The court explained Kentucky law as follows:

...if you collect on a workers' compesnaiton claim, you cannot collect the awards in the civil action that mirror workers' compensation benefits; i.e., money for past and future medical expenses, lost wages, and the impairment of power to earn money.  If an employee does pursue both claims, then the employer has a right to subrogation against the proceeds recovered in the civil action that duplicate the workers' compensation benefits. This prevents the employee from receiving a double recovery. 

The court then explained that Wal-Mart's workers compensation liability would be calculated as follows: first, a total of $444,080.36 of the damages recovered from Atlas and Unarco duplicated workers compensation benefits and therefore were subject of a subrogation lien by Wal-Mart. Second, the fees and expenses incurred by Wells in prosecuting his claims against Atlas and Unarco must be deducted; these totaled $317,268.76.  Therefore, Wal-Mart had a subrogation credit of $126,811.60 ($444,080.36 minus $317,268.76).

Robert L. Abell
www.RobertAbellLaw.com 

Injury From Unexplained Fall Covered By Workers' Compensation

An injury sustained on the job is presumed work-related and covered by workers' compensation.  The Kentucky Supreme Court reaffirmed this principle recently in Vacuum Depositing, Inc. v. Dever, No 2008-SC-853-WC (June 25, 2009).  The employer must demonstrate by substantial evidence that the injury is not work-related for workers compensation not to apply.

Dever slipped and fell in the break room.  There were no witnesses and she "did not know why she fell."  She suffered a fractured wrist and sustained a minor back injury.  According to another employee, Dever later stated that she was "clumsy," that she had "just turned around and fell and had no idea how" and that she was "the only person she knew that could fall while standing still."  At the time of the fall, Dever was wearing high heels, which were commonly worn by women in the office.  An administrative law judge denied her claim on the grounds that the injury was due to her clumsiness and was not work-related.

The Supreme Court ruled that Dever's injury was covered by workers' compensation.  First, Kentucky law presumes that an unexplained workplace fall is work-related unless the employer presents substantial evidence to show otherwise.  To prevail the employer was required to show that the fall was not work-related.  The court ruled that evidence that Dever was clumsy and wearing high heels was not sufficient to demonstrate that her fall was not work-related and not covered by workers' compensation.

Learn more about your rights under Kentucky workers compensation law here.

Robert L. Abell
www.RobertAbellLaw.com