Court Opinion

ID: 5123673
Source: CourtListenerOpinion
Date Created: 2021-11-05 14:07:33.522762+00
Date Added: 2024-06-11T08:22:35.397737
License: Public Domain

RENDERED: OCTOBER 29, 2021; 10:00 A.M.
                       NOT TO BE PUBLISHED

               Commonwealth of Kentucky
                         Court of Appeals

                            NO. 2021-CA-0603-WC

LEWIS DOOR SERVICE CO.                                           APPELLANT

                 PETITION FOR REVIEW OF A DECISION
v.             OF THE WORKERS’ COMPENSATION BOARD
                       ACTION NO. WC-15-51294

JOHN J. REKER; HONORABLE
MONICA RICE-SMITH,
ADMINISTRATIVE LAW JUDGE;
AND WORKERS’ COMPENSATION
BOARD                                                             APPELLEES

                                  OPINION
                                 AFFIRMING

                                ** ** ** ** **

BEFORE: COMBS, GOODWINE, AND LAMBERT, JUDGES.

GOODWINE, JUDGE: Lewis Door Service Co. (“Lewis Door”) appeals a

decision of the Workers’ Compensation Board (“the Board”) holding the

Administrative Law Judge (“ALJ”) properly found Lewis Door’s failure to provide
proper notification under KRS1 342.040(1) tolled the statute of limitations. After

careful review, finding no error, we affirm.

                The Board summarized the pertinent facts as follows:

                      The sole issue on appeal concerns KRS 342.040(1)
                and the statute of limitations. Therefore, we will not
                discuss the medical evidence of record.

                       Reker filed a Form 101 on February 26, 2020
                alleging he injured his right shoulder in the course of his
                job duties as a garage door installer for Lewis Door on
                June 1, 2015 while pushing on a spring. Reker was 64
                years old when he was injured, and he has not worked
                since that date.

                       Lewis Door, as insured by KAGC/Ladegast &
                Heffner (“Ladegast”), filed a Form 111 denying the
                claim. It alleged Reker’s claim was barred by the statute
                of limitations stating, “Claimant was 64 years old on date
                of injury and exhausted his income benefits.
                Subsequently, more than 2 years had passed by the time
                he filed his claim on 2/26/20.”

                        Lewis Door filed electronic documents obtained
                through an open records request with the Department of
                Workers’ Compensation (“DWC”) reflecting Lewis Door
                submitted a first report for the work injury on June 15,
                2015. Lewis Door submitted an “IP-initial payment”
                document on June 23, 2015, notifying the DWC that it
                initiated payment of TTD benefits on June 2, 2015. The
                records reflect Lewis Door filed multiple “BM-Bi
                Monthly” documents notifying the DWC that it
                continued to pay Reker weekly TTD benefits. The last
                record is a “S7-Suspension, Benefits Exhausted”
                document notifying the DWC that it paid Reker weekly
                TTD benefits in the amount of $488.09 from June 2,

1
    Kentucky Revised Statutes.

                                            -2-
2015 through May 29, 2017 for a total of $50,761.36.

       Lewis Door submitted a Pay Log Report for
indemnity payments reflecting Reker’s weekly TTD
benefits were paid from June 2, 2015 to May 29, 2017 for
a total of $50,761.36. Lewis Door also filed a Pay Log
Report for $118,985.95 in medical expenses it paid on
Reker’s behalf from June 2015 through October 2018.

       Reker testified by deposition on June 18, 2020 and
at the final hearing held October 19, 2020. Reker was
born on April 2, 1951. He began working as a service
technician for Lewis Door in July 1995. Reker injured his
right shoulder on June 1, 2015 as he was replacing a
broken spring. Dr. Scott Kuiper performed a right rotator
cuff repair on June 23, 2015, a revision rotator cuff repair
on November 15, 2015, and a reverse total right shoulder
replacement on August 25, 2016. Reker testified his
right shoulder condition deteriorated after the total
replacement, and he was eventually referred to Dr. Mark
Smith for a second opinion. Dr. Smith performed a
revision of the total right shoulder replacement on March
6, 2018.

       Reker continued to treat with Dr. Smith through
November 2018. Reker has never been released to return
to his pre-injury job with Lewis Door, nor has he worked
anywhere since June 1, 2015. Ladegast paid for all
of his medical treatment. However, he stopped receiving
TTD benefits on May 29, 2017. Reker called Terry
Whiting (“Whiting”), an adjuster with Ladegast, to
determine why his TTD benefits had ceased. Whiting
informed him he stopped receiving TTD benefits “due to
whatever law it was, that they didn’t have to pay me
anymore and I had to go on Social Security.” He then
applied for and began receiving Social Security
retirement benefits.

      Reker had a subsequent conversation with
Whiting, who told him TTD benefits could be available

                            -3-
to him. She advised the law had been reversed and he
could start receiving TTD benefits again. He did not
understand how this could affect his regular Social
Security benefits. Reker informed Whiting he would call
her back after he discussed this with his wife, but he has
not spoken to her since then.

       Reker had several previous work injuries while
employed by Lewis Doors for which he received TTD
benefits, but never filed a formal claim. Reker did not
receive a statute of limitations letter upon termination of
TTD benefits for his previous injuries. Reker testified no
one from Ladegast ever advised him what statute of
limitations meant, and he did not understand its meaning
or implication before meeting with counsel in 2020.

       Whiting testified by deposition on May 28, 2020.
She has been employed by Ladegast since August 2001
and was assigned to Reker’s claim. Whiting became
aware of the holding in Parker v. Webster County Coal,
529 S.W.3d 759 (Ky. 2017), “when the decision was
made.” Her supervisor notified the claims adjusters of
the Parker decision. Whiting testified she was provided a
copy of the Parker decision at the meeting, and was told
to be conscious of people’s age and the duration of TTD
benefits. Whiting testified her supervisor closely
followed Reker’s claim.

      Whiting confirmed Ladegast paid Reker’s medical
expenses through at least October 2018. She confirmed
Reker was paid TTD benefits through May 29,
2017, when he reached age sixty-six. . . .

...

. . . Whiting could not recall if she believed Reker was
statutorily prohibited from receiving additional TTD
benefits as of May 29, 2017 pursuant to the Parker
decision. Whiting also testified she is familiar with
House Bill 2 effective July 14, 2018, terminating benefits

                            -4-
            at age 70. Whiting testified she believed Reker’s statute
            of limitations expired on May 30, 2019, two years after
            the last payment of TTD benefits.

                   On September 28, 2018, Dr. Smith noted Reker
            underwent a revision of a right reverse total shoulder on
            March 8, 2018. He recommended additional physical
            therapy and restricted Reker from work. As of
            September 28, 2018, Whiting acknowledged the statute
            of limitations had not expired; Reker had undergone
            surgery for which his treating physician restricted him
            from work; Reker was not at maximum medical
            improvement; the old age Social Security retirement
            limitation contained in KRS 342.730(4) no longer
            applied; and the recent version of KRS 342.730(4) was
            effective and terminated benefits at age 70. Whiting
            stated TTD benefits were possibly payable as of
            September 28, 2018.

            ...

                   In the December 21, 2020 Opinion, the ALJ
            determined the June 1, 2015 work injury warrants a 22%
            impairment rating, and Reker is permanently totally
            disabled. The ALJ awarded PTD benefits subject to the
            limitations contained in the version of KRS 342.730(4)
            effective July 14, 2018, and medical expenses. The ALJ
            found Reker’s claim was not barred by the statute of
            limitations because Lewis Door failed to satisfy the
            notice requirements contained in KRS 342.040.

Record (“R.”) at 635-47.

            Lewis Door filed a petition for rehearing, which the ALJ denied.

Lewis Door then appealed to the Board.

                                         -5-
             Lewis Door argued “it fully complied with the notice requirements

contained in KRS 342.040,” and “the ALJ erred in determining the statute of

limitations was tolled due to its failure to provide proper notification.” R. at 648.

Lewis Door further argued “Reker’s remedy lies with the Board of Claims against

the Commonwealth of Kentucky or by filing a claim against the Commissioner in

Circuit Court.” Id. Lewis Door asserted the DWC’s negligence in failing to send

out a limitations notification upon receiving an S7 notification was why Reker was

not notified of the limitations period.

             The Board affirmed the decision of the ALJ based on the following

reasoning:

                     KRS 342.185(1) and KRS 342.040(1) operate
             together to toll periods of limitations until after the
             payment of voluntary income benefits ceases in order to
             protect injured workers from being lulled into a false
             sense of security by receiving income benefits and failing
             to pursue a claim. KRS 342.040(1) places an affirmative
             duty upon an employer who terminates or fails to make
             payments when due to notify the Commissioner of such
             failure. An employer who fails to comply with KRS
             342.040(1) is estopped from raising the limitations
             defense because it effectively prevents the Commissioner
             from complying with its duty to advise the employee of
             his or her right to prosecute the claim. Billy Baker
             Painting v. Barry, 179 S.W.3d 860, 865 (Ky. 2005). See
             also H.E. Neumann v. Lee, 975 S.W.2d 917 (Ky. 1998).
             It is unnecessary to establish an employer acted in bad
             faith for it to be estopped from raising the statute of
             limitations defense. Id. Whether the statute of
             limitations is tolled due to an employer’s failure to
             comply with KRS 342.040(1) depends on the

                                          -6-
facts and circumstances of each case. Colt Management
Company v. Carter, 907 S.W.2d 169, 170 (1995).

...

        It is undisputed Reker sustained a work-related
injury on June 1, 2015, for which he provided timely
notice. It is also undisputed Lewis Door paid voluntary
TTD benefits until May 27, 2017, and submitted an
electronic form utilizing code “S7-Suspension, Benefits
Exhausted” to notify the DWC that it paid Reker TTD
benefits through May 29, 2017. The EDI event table sets
forth many codes an insurer could use to notify the DWC
of ceasing indemnity benefits which generates a statute
letter. (“MTC Codes: 04, CD, S1, S2, S3, S4, S5, S6, S8,
S9, SD will generate a statute letter.”) However, the EDI
event table specifically notes, “S7 will NOT generate
letter.” (original emphasis). A statute letter was not
generated or triggered since Ladegast utilized the S7
code, presumably because Reker had reached the age
limitation contained in the previous version of KRS
342.730(4).

       When Reker’s TTD benefits were stopped, the
Kentucky Supreme Court had already issued Parker v.
Webster County Coal, supra, holding the age limitation
contained in the 1996 version of KRS 342.730(4) is
unconstitutional. The Parker decision became final in
November 2017, prior to Reker undergoing his fourth
surgery. The current version of KRS 342.730(4) became
effective July 14, 2018, terminating benefits at age
seventy or four years after the date of injury,
whichever occurs later. In Holcim v. Swinford, 581
S.W.3d 37 (Ky. 2019), the Kentucky Supreme Court
determined the amendments to KRS 342.730(4) were
retroactive to all claims still pending on the effective date
of the statutory changes.

       Given the unique circumstances of this claim, we
find the ALJ did not err in determining the statute of

                             -7-
limitations was tolled due to Lewis Door’s failure to
provide proper notification required by KRS 342.040(1).
Although Lewis Door notified the Commissioner when it
terminated Reker’s TTD benefits in accordance
with the previous version of KRS 342.730(4), the law
subsequently changed with retroactive application. As
noted by the ALJ, the Court rendered Parker v. Webster
County Coal, supra, on April 27, 2017, finding the
previous version of KRS 342.730(4) unconstitutional.
Parker v. Webster County Coal, supra, became final on
November 2, 2017. We agree with the ALJ’s
determination that as of November 2, 2017, Lewis
Door’s basis for terminating Reker’s TTD benefits was
no longer valid.

...

       We decline to limit the “fails to make payments
when due” language contained in KRS 342.040(1) to
only those circumstances where no TTD benefits have
been paid. . . .

...

       Finally, Lewis Door argues Reker’s remedy lies
with the Board of Claims or Circuit Court. We disagree.
The Supreme Court in Kentucky Container Services, Inc.
v. Ashbrook, 265 S.W.3d [793, 795-96 (Ky. 2008)],
stated as follows:

      KRS 342.990 provides civil and criminal
      penalties for an employer’s failure to
      comply with KRS 342.040(1), but
      Chapter 342 provides no remedy for the
      affected worker. Thus, the courts have
      turned to equitable principles when the
      circumstances warranted and estopped
      employers who failed to comply strictly with
      KRS 342.040(1) from asserting a limitations

                           -8-
                    defense, even in the absence of bad faith or
                    misconduct.

R. at 648-55.

             The Board affirmed the ALJ’s December 21, 2020 Opinion, Award,

and Order and the January 21, 2021 Order. This appeal followed.

             On appeal, Lewis Door argues: (1) it had no duty to generate a statute

letter as it provided notice to the DWC under KRS 342.040(1); (2) it had no duty to

provide the DWC with additional notice regarding Reker’s TTD benefits after

Parker became final; and (3) it is entitled to rely on the statute of limitations even

though Reker never received a statute letter. Lewis Door’s arguments center

around whether the Board properly affirmed the ALJ’s determination that its

failure to strictly comply with the notice requirement under KRS 342.040(1)

required tolling of the two-year statute of limitations under KRS 342.185(1).

             KRS 342.185(1) establishes a two-year statue of limitations for

workers’ compensation claims:

             Except as provided in subsections (2) and (3) of this
             section, no proceeding under this chapter for
             compensation for an injury or death shall be maintained
             unless a notice of the accident shall have been given to
             the employer as soon as practicable after the happening
             thereof and unless an application for adjustment of claim
             for compensation with respect to the injury shall have
             been made with the department within two (2) years after
             the date of the accident, or in case of death, within two
             (2) years after the death, whether or not a claim has been
             made by the employee himself or herself for

                                          -9-
             compensation. The notice and the claim may be given or
             made by any person claiming to be entitled to
             compensation or by someone in his or her behalf. If
             payments of income benefits have been made, the filing
             of an application for adjustment of claim with the
             department within the period shall not be required, but
             shall become requisite within two (2) years following the
             suspension of payments or within two (2) years of the
             date of the accident, whichever is later.

KRS 342.040(1), in pertinent part, requires:

             If the employer’s insurance carrier or other party
             responsible for the payment of workers’ compensation
             benefits should terminate or fail to make payments when
             due, that party shall notify the commissioner of the
             termination or failure to make payments and the
             commissioner shall, in writing, advise the employee or
             known dependent of right to prosecute a claim under this
             chapter.

             Below, Lewis Door bore the burden of proof because KRS 342.040

“and principles of equity require that the employer bear the consequences.”

Ingersoll-Rand Co. v. Whittaker, 883 S.W.2d 514, 515 (Ky. App. 1994). “Where

the ALJ finds against the party with the burden of proof, the standard of review on

appeal is whether the evidence compelled a contrary finding.” Livingood v.

Transfreight, LLC, 467 S.W.3d 249, 254 (Ky. 2015) (citing FEI Installation, Inc. v.

Williams, 214 S.W.3d 313 (Ky. 2007)). The ALJ, as “fact-finder[,] has the sole

discretion to determine the quality, character, and substance of evidence and to

draw reasonable inferences from the evidence.” Magic Coal Co. v. Fox, 19

S.W.3d 88, 96 (Ky. 2000) (citations omitted). “The function of further review of

                                        -10-
the [Board] in the Court of Appeals is to correct the Board only where the . . .

Court perceives the Board has overlooked or misconstrued controlling statutes or

precedent, or committed an error in assessing the evidence so flagrant as to cause

gross injustice.” Western Baptist Hosp. v. Kelly, 827 S.W.2d 685, 687-88 (Ky.

1992). “The crux of the inquiry on appeal is whether the [ALJ’s] finding . . . is so

unreasonable under the evidence that it must be viewed as erroneous as a matter of

law.” Ira A. Watson Dep’t Store v. Hamilton, 34 S.W.3d 48, 52 (Ky. 2000) (citing

Special Fund, 708 S.W.2d at 643).

             In Davis v. Blendex Company, 626 S.W.3d 523 (Ky. 2021), the

Kentucky Supreme Court reaffirmed the application of equitable estoppel in

instances where the employee did not receive notice of the statute of limitations. It

is well-established Kentucky courts have “‘turned to equitable principles when the

circumstances warranted and estopped employers who failed to comply strictly

with KRS 342.040(1) from asserting a limitations defense, even in the absence of

bad faith or misconduct.” Id. at 532 (quoting Hitachi Automotive Products USA,

Inc. v. Craig, 279 S.W.3d 123, 125 (Ky. 2008). However, the Court cautioned that

“estoppel is an equitable remedy and that the appropriateness of its application

depends on the facts and circumstances of each case.” Id. (citations omitted).

Application of estoppel requires the satisfaction of four elements:

             1.) acts, language, or silence amounting to a
             representation or concealment of material facts; 2.) the

                                        -11-
             facts are known to the estopped party but unknown to the
             other party; 3.) the estopped party acts with the intention
             or expectation that the other party will rely on its
             conduct; and 4.) the other party does so to its detriment.

Id. (quoting Craig, 279 S.W.3d at 125-26). In sum, tolling is the appropriate

remedy under the specific facts of a case where “for one reason or another, the

employer failed to meet its notice requirements under KRS 342.040(1) resulting in

the employee never being informed of his or her right to prosecute a claim or the

applicable statute of limitations.” Id. at 532-33.

             As discussed above, Lewis Door “exhausted” Reker’s TTD benefits

under the now unconstitutional version of KRS 342.430(4) when he turned 66

years old on May 29, 2017. The Kentucky Supreme Court rendered the Parker

decision on April 27, 2017, holding the age limitation in the 1996 version of KRS

342.430(4) unconstitutional. Parker became final on November 2, 2017, and

Reker subsequently had his fourth surgery. The current version of KRS

342.730(4) became effective on July 14, 2018, which terminates benefits at age 70

or four years after the date of injury, whichever occurs later. Then in Holcim v.

Swinford, 581 S.W.3d 37 (Ky. 2019), the Kentucky Supreme Court determined the

amendments to KRS 342.730(4) were retroactive to all claims still pending on the

effective date of the statutory changes.

             The Board held the ALJ did not err in finding Lewis Door’s failure to

provide proper notification of the statute of limitations required by KRS

                                           -12-
342.040(1) required tolling of the statute of limitations. Under the unique

circumstances of this case, the retroactive application of the new version of KRS

341.730(4) meant that Lewis Door’s basis for terminating Reker’s TTD benefits

was no longer valid. The Board determined Lewis Door knew, after the rendition

of Parker, that Recker was still entitled to benefits and that S7 was no longer the

appropriate notification for the claim. Despite this knowledge, Lewis Door argues

the blame should be placed on the DWC, and it did not have a duty to attempt to

correct the now inappropriate notice.

             Even in situations where “the employer attempted in good faith to

satisfy its notice requirements, but was unsuccessful,” the Kentucky Supreme

Court has upheld the tolling of the statute of limitations under KRS 342.040(1).

Davis, 626 S.W.3d at 533. The Court has held “that the equities favored the

claimant.” Id. at 534 (quoting Bill Baker Painting v. Barry, 179 S.W.3d 860, 865

(Ky. 2005)). Thus, even if Lewis Door’s decision not to correct the notice when it

was clear Reker was due benefits until age 70 under the new version of KRS

342.730(4) was made in good faith, Reker should not be penalized for Lewis

Door’s failure to strictly comply with KRS 342.040(1). Through no fault of his

own, Reker clearly did not receive a statute of limitations letter. “The statute and

principles of equity require that the employer bear the consequences.” Whittaker,

883 S.W.2d at 515.

                                        -13-
           For the foregoing reasons, we affirm the opinion of the Workers’

Compensation Board.

           ALL CONCUR.

BRIEF FOR APPELLANT:                   BRIEF FOR APPELLEE JOHN J.
                                       REKER:
John S. Harrison
Louisville, Kentucky                   Scott C. Justice
                                       Louisville, Kentucky

                                     -14-