Opinion ID: 2390365
Heading Depth: 1
Heading Rank: 1

Heading: krs 342.690(1): the exclusive remedy provision of the workers' compensation act

Text: The Kentucky Workers' Compensation Act is predicated on the concept of `no-fault' liability. Each employer subject to the Act agrees to pay both lost wages and medical expenses to an employee injured on the job. In return, each employee subject to the Act relinquishes all common law claims against the employer arising out of a work-related injury. See, e.g., Zurich Insurance Company v. Mitchell, Ky., 712 S.W.2d 340, 341 (1986); General Accident Insurance Company v. Blank, Ky.App., 873 S.W.2d 580, 581 (1993). Under the Act, the employer's liability is exclusive. The exclusive remedy provision of the Act states in relevant part: 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, ... and anyone otherwise entitled to recover damages from such employer at law .. on account of such injury or death. KRS 342.690(1) (emphasis added). Philadelphia contends that this provision precludes recovery of UIM benefits from the employer's policy when workers' compensation benefits have been paid. In the Court of Appeals, the statute was interpreted as establishing an exclusive remedy against an employer only when the employer is legally liable for the injuries sustained. It reasoned that since legal liability was upon the third party tortfeasor, Tedford, and not the employer, Medora, that KRS 342.690(1) did not bar Morris from recovering under Medora's UIM coverage. Central to the view of the Court of Appeals was that UIM coverage was not payable as a result of the policy owner's tort liability, but payable by virtue of a contract. Philadelphia contends that KRS 342.690(1) precludes recovery of UIM benefits by Morris regardless of whether such coverage is based on contract or tort. Philadelphia urges this Court to follow the rationale expressed in Berger v. H.P. Hood, Inc., 416 Mass. 652, 624 N.E.2d 947 (1993), a Massachusetts case in which the court held that the workers' compensation exclusive remedy provision could not be avoided merely by characterizing the claim as contractual. In Berger , the court stated: The plaintiff's UM claim derives from the same incident, a personal injury sustained in the course of employment, which gave rise to the payment of Workers' compensation. Merely characterizing the claim as contractual does not alter the essential nature of this common law claim. Hood, if required to pay UM benefits, still would be paying a worker for an injury sustained in the course of employment. Id. at 949 (citation omitted). The court then concluded that for liability purposes, the employer and the insurance company were synonymous, stating Any suit against Fund and First is essentially a suit against Hood, as an owner of the policies. We have determined that suits against Hood are barred by [the exclusivity provision of the Workers' Compensation Act]. Thus, summary judgment in favor of First and Fund on Hood's UM coverage was appropriate. Id. at 950. We decline to follow Berger for the reason that the UIM coverage at issue here is not based on Medora's legal liability. Morris' UIM claim was against Philadelphia, the UIM insurance carrier, not against his employer, Medora. Medora's legal liability is unaffected. As stated in Coots v. Allstate Insurance Co., Ky., 853 S.W.2d 895, 903 (1993), a suit to recover UIM coverage is a direct action against the UIM carrier and the [UIM] carrier alone is the real party in interest in UIM cases. Furthermore, under Kentucky law UIM coverage is contractual in nature. This principle is stated in State Farm Mutual Insurance Co. v. Fireman's Fund American Insurance Co., Ky., 550 S.W.2d 554, 557 (1977): [P]ayment made in performance of a contractual obligation is not payment of damages. Hence the liability of an insurance company under its uninsured motorist coverage cannot be legal liability for damages. The UIM coverage at issue was voluntarily purchased by Medora, presumably to apply in cases such as this. KRS 342.690(1) does not preclude recovery of UIM benefits, since it only protects the employer, not its UIM insurance carrier.