Opinion ID: 1638104
Heading Depth: 1
Heading Rank: 4

Heading: The UEF's Responsibility for Interest

Text: The Court of Appeals relied on the principle stated in Commonwealth, Department of Transportation, Bureau of Highways v. Lamb [6] that the Commonwealth and its agencies are exempt from paying interest on public debts unless a statute or contract explicitly authorizes interest. The court determined that the UEF bears no responsibility for interest on a lump-sum death benefit because no statute specifically waives its immunity or specifically requires it to pay interest on past-due income benefits. We reverse because we conclude that the court construed the relevant statutes too narrowly. The statute under which a plaintiff claims recovery must authorize interest, [7] but the general interest on judgment statute (KRS 360.040) does not apply to state agencies absent an explicit declaration by the legislature or an explicit contract provision to that effect. [8] Nonetheless, the court looks beyond a statute's surface to its substance when determining if it authorizes a state agency to pay interest. The court determined in Commonwealth, Department of Highways v. Young [9] that the general interest statute applied to a Board of Claims award because KRS 44.140(2) (now KRS 44.140(5)) provided that a circuit court judgment rendered on appeal from the award shall have the same effect and be enforceable as any other judgment of the court in civil causes. The court reasoned that, in substance, KRS 44.140(2) provided for all of the attributes of any other judgment to follow the circuit court's judgment on appeal. We view KRS 342.760 and KRS 342.790 as holding the UEF responsible for the uninsured employer's entire liability for income benefits, including interest on past-due benefits, and as permitting the UEF to recover liquidated damages from the employer with interest. KRS 342.760(3) funds the UEF with all fines and penalties collected under Chapter 342, and KRS 342.760(1) provides explicitly that all moneys and securities in the fund shall be held in trust by the commissioner of the Department of Labor and shall not be considered a part of the general funds of the state. When an employer defaults on its compensation liability due to its failure to comply with KRS 342.340, [10] KRS 342.760(4) holds the UEF responsible for paying benefits and subrogates the UEF to all the rights of the person receiving such compensation from the fund. Realty Improvement [11] established that a deceased worker's estate is a person for the purposes of KRS 342.750 and that a lump-sum death benefit is a form of income benefit. Among the rights of a person receiving compensation is the right to an award that includes interest on past-due income benefits as provided by KRS 342.040(1). Thus, the UEF's responsibility and its right of subrogation under KRS 342.760(4) include the portion of the award that represents interest. KRS 342.790(3) provides that when an employer fails to pay compensation according to the terms of [an] award, the award shall constitute a liquidated claim for damages against that employer in an amount commuted to a lump sum. It also provides that the Attorney General shall institute a civil action against the employer to collect the lump sum amount with interest. Thus, having paid an award, the UEF is entitled to a judgment against the uninsured employer for the liquidated damages with interest. The decision of the Court of Appeals is affirmed in part and reversed in part, and the decision of the ALJ is reinstated. All sitting. All concur.