Opinion ID: 2124870
Heading Depth: 1
Heading Rank: 2

Heading: Credit for Short-Term Disability

Text: The employer asserted that KRS 342.730(6) permitted it to credit the short-term disability benefits the claimant received against its liability for his workers' compensation award. Hence, it was the employer's burden to establish its entitlement. Although the Board disagreed with the ALJ's reasoning, it affirmed the decision to refuse the credit. The Court of Appeals reversed, however, and remanded the claim for a finding of whether the short-term disability plan contained an offset for workers' compensation and for a reconsideration of the employer's right to a credit. Convinced that the Court of Appeals misinterpreted KRS 342.730(6) and that the evidence would not support a reasonable finding in the employer's favor, we reverse. Employers commonly provide a package of private benefits in addition to statutorily-required workers' compensation benefits. Many private plans cover disability without regard to its cause, and many do not contain an offset if plan benefits duplicate workers' compensation benefits. Until December 12, 1996, no statute permitted the offset of workers' compensation benefits for private benefits that duplicated them. As a result, the courts were often asked to consider whether the payment of private benefits could be used to offset the employer's workers' compensation liability. See, for example, GAF Corporation v. Barnes, 906 S.W.2d 353 (Ky.1995); Gatliff Coal Co. v. Evans, 896 S.W.2d 608 (Ky.1995); American Standard v. Boyd, 873 S.W.2d 822 (Ky.1994); Conkwright v. Rockwell International, 920 S.W.2d 90 (Ky.App.1996) (overruled in Williams v. Eastern Coal Corp., 952 S.W.2d 696 (Ky.1997); Eastern Coal Corp. v. Mullins, 845 S.W.2d 27 (Ky.App.1993); Beth-Elkhorn Corp. v. Lucas, 670 S.W.2d 480 (Ky.App.1983) (overruled in Williams v. Eastern Coal Corp., supra ); and South Central Bell Telephone Co. v. George, 619 S.W.2d 723 (Ky.App.1981)). Effective December 12, 1996, the legislature enacted KRS 342.730(6) to prevent workers from receiving duplicate private disability and workers' compensation benefits. It provides as follows: All income benefits otherwise payable pursuant to this chapter shall be offset by payments made under an exclusively employer-funded disability or sickness and accident plan which extends income benefits for the same disability covered by this chapter, except where the employer-funded plan contains an internal offset provision for workers' compensation benefits which is inconsistent with this provision. (emphasis added). It was enacted to address situations where an employer-funded plan permits benefits without regard to the cause of the recipient's disability and fails to contain an offset for workers' compensation benefits. Shortly after KRS 342.730(6) was enacted, the court determined in Williams v. Eastern Coal Corp., supra , that private benefits for a pre-December 12, 1996, injury could not be applied to reduce an employer's workers' compensation liability absent statutory authorization. The short-term disability plan that is at issue was part of a package of benefits the employer provided through an insurance contract. It is undisputed that the weekly indemnity benefit (short-term disability) was employer-funded. The schedule of benefits and plan documents that were introduced during Mr. Feagan's deposition indicate, among other things, that disability benefits are payable for up to 26 weeks and that the carrier has the right to recover any excess payment. They do not state that plan benefits are offset by workers' compensation benefits; however, they state, explicitly, that the plan does not cover disability for an injury or sickness due to employment with any employer. It is apparent, therefore, that because the plan does not extend income benefits for a disability that is covered by Chapter 342, it is not the type of plan for which KRS 342.730(6) provides an offset. Therefore, no offset is permitted on these facts. This is not the type of case in which the claimant's ultimate recovery will necessarily be greater than Chapter 342 requires. He received the private benefits under a plan that did not cover work-related disability. It was later determined that his disability was work-related. Therefore, both the explicit terms of the insurance contract and the law of Kentucky entitle the carrier to recover the private benefits that it paid under a mistaken belief that the claimant's injury was not work-related. See Riverside Insurance Company v. McDowell, 576 S.W.2d 268 (Ky.App.1979). Assuming that happens, there will be no double recovery. The decision of the Court of Appeals is affirmed in part and reversed in part, and the award is reinstated as it was rendered. All concur.