Court Opinion

ID: 4091263
Source: CourtListenerOpinion
Date Created: 2016-10-20 15:09:12.281574+00
Date Added: 2024-06-11T14:35:46.421045
License: Public Domain

IMPORTANT NOTICE
        NOT TO BE PUBLISHED OPINION

THIS OPINION IS DESIGNATED "NOT TO BE PUBLISHED."
PURSUANT TO THE RULES OF CIVIL PROCEDURE
PROMULGATED BY THE SUPREME COURT, CR 76.28(4)(C),
THIS OPINION IS NOT TO BE PUBLISHED AND SHALL NOT BE
CITED OR USED AS BINDING PRECEDENT IN ANY OTHER
CASE IN ANY COURT OF THIS STATE; HOWEVER,
UNPUBLISHED KENTUCKY APPELLATE DECISIONS,
RENDERED AFTER JANUARY 1, 2003, MAY BE CITED FOR
CONSIDERATION BY THE COURT IF THERE IS NO PUBLISHED
OPINION THAT WOULD ADEQUATELY ADDRESS THE ISSUE
BEFORE THE COURT. OPINIONS CITED FOR CONSIDERATION
BY THE COURT SHALL BE SET OUT AS AN UNPUBLISHED
DECISION IN THE FILED DOCUMENT AND A COPY OF THE
ENTIRE DECISION SHALL BE TENDERED ALONG WITH THE
DOCUMENT TO THE COURT AND ALL PARTIES TO THE
ACTION.
                                            RENDERED: SEPTEMBER 22, 2016
                                                    NOT TO BE PUBLISHED

               oi5uprrtnt        (bud of T,.fitt        *mit\
                              2015-SC-000658-WC         h        LI
UNINSURED EMPLOYERS' FUND,
                                                       IA-J 71404h                Dc.
COMMONWEALTH OF KENTUCKY                                              APPELLANT

                 ON APPEAL FROM COURT OF APPEALS
V.        CASE NOS. 2014-CA-001758-WC AND 2014-CA-001794-WC
                WORKERS' COMPENSATION NO. 04-00504

POPLAR BROOK DEVELOPMENT, LLC.;
BARBARA NEGROE; TIMOTHY HANNAH;
CALVIN BAKER; BRIAN TERRY;
HONORABLE J. LANDON OVERFIELD,
ADMINISTRATIVE LAW JUDGE; AND
WORKERS' COMPENSATION BOARD                                           APPELLEES

                  MEMORANDUM OPINION OF THE COURT

                                  AFFIRMING

      Appellant, Uninsured Employers' Fund, Commonwealth of Kentucky

("UEF"), appeals a Court of Appeals decision which affirmed the finding that

Appellees, Poplar Brook Development, LLC ("PBD"), Barbara Negroe, and Calvin

Baker were not responsible to pay for Timothy Hannah's workers'

compensation award. The Court of Appeals also held that Hannah did not

have to reimburse temporary total disability ("TTD") benefits paid to him after

he reached maximum medical improvement ("MMI") based on the terms of an
agreed order he entered into with the UEF and Terry. The UEF argues that

both of these findings were erroneous. For the below stated reasons we affirm.

      PBD was a limited liability company formed by Terry, Negroe, and Robert

Tobiason to develop a subdivision in the Elizabethtown, Kentucky area. All

three of them were engineers at General Electric ("GE"). PBD purchased land

and installed infrastructure so that lots could be sold in the subdivision.

      Negroe was on assignment for GE in Mexico when she learned she was

being transferred back to Louisville. She purchased a lot at cost from PBD in

order to build a family home. Negroe was able to purchase the lot at cost due

to being a partner in PBD. Negroe then hired Terry to be the project manager.

The project manager agreement entered into between Negroe and Terry stated

that he was the "signing member of Poplar Brook Development, LLC." Terry

opened up an account with a local lumber store under PBD's name to purchase

materials for the construction. Terry then hired workers, including Baker, to

assist with construction. Baker in turn recruited Hannah to help frame the

house at the rate of ten dollars an hour. Hannah previously performed work

for PBD constructing its infrastructure. No workers' compensation insurance

was obtained for the project, even though when Negroe obtained the building

permit it indicated that coverage must be maintained. Negroe ultimately fired

Terry as project manager and took a more hands on role regarding the house

construction.

      On February 27, 2004, Hannah fell from a ladder while he was working

on the deck of Negroe's house. Hannah fell into a hole and experienced a pop

                                         2
and pain in the middle of his back to his tail bone. He later experienced pain

in his. right ankle due to blood clots. On March 10, 2004, Hannah filed a Form

101 alleging he sustained a compression fracture of his lumbar spine. The

Form 101 listed Baker, Terry, PBD, and the UEF as parties. By this time Terry

had declared bankruptcy and had left the Elizabethtown area.

      The claim was bifurcated to determine the status of Hannah's

employment and his average weekly wage. The ALJ determined that Hannah

was an employee and that Terry was acting as his employer either by contract

or by favor to Negroe. Because Terry did not maintain workers' compensation

insurance, the UEF was found responsible for the payment of Hannah's

benefits. Hannah's average weekly wage was found to be $400.

      On December 21, 2004, the ALJ approved an agreed order among the

UEF, Hannah, and Terry, which recognized that Terry was in default of paying

TTD benefits and medical benefits. The agreement provided that the UEF

would pay TTD benefits to Hannah in the amount of $266.66 per week from the

date of the accident until "terminated by the order of the [Al.,J]." The UEF also

agreed to pay any medical expenses necessary for the treatment of Hannah's

work-related injury until he reached MMI. The claim was placed in abeyance

until Hannah reached MMI.

      In July 2006, the ALJ ordered the parties to file a status report of

Hannah's condition and to explain why the claim should not be returned to the

active docket. Hannah filed a timely status report stating that he had not

reached MMI and was continuing to receive TTD benefits. The UEF filed a

                                        3
report by Dr. David Shraberg following an independent neuropsychiatric

evaluation of Hannah. Dr. Shraberg stated that Hannah had been released to

work, but continued to complain of pain. Dr. Shraberg noted that Hannah was

being treated by pain management specialist, Dr. Rinkoo Aggrawal, and was

receiving "fairly massive amounts of narcotics." Dr. Shraberg disagreed with

Dr. Aggrawal's apparent belief that Hannah suffered from a traumatic brain

injury as a result of his fall. Dr. Shraberg believed that Hannah reached MMI

well before his evaluation and was suffering the effects of "massive

narcotization." He suggested that Hannah be taken off of the pain medications

and return to work.

      Despite this report, no motion to remove the claim from abeyance was

filed and Hannah continued to submit status reports indicating he had not

reached MMI. The UEF continued to pay TTD and medical benefits.

      On July 7, 2009, the UEF filed the report of Dr. Timothy Kriss, a

neurosurgery specialist, who conducted an IME of Hannah on May 18, 2009.

He noted that Hannah did not complain of back pain and that his lumbar

spine was normal. Dr. Kriss examined an MRI scan of Hannah taken on

February 28, 2004, and concluded that Hannah suffered from an "indentation"

in the margin of the L1 cortex instead of a true compression fracture. Dr. Kriss

concluded it had healed and was asymptomatic. He believed that any

complaints Hannah had regarding pain in his left thigh, or numbness or

tingling would resolve with weight loss. Dr. Kriss did not believe Hannah
suffered any traumatic brain injury and suggested that he be weaned off any

narcotic medication.

      Dr. Kriss performed a second evaluation of Hannah on September 12,

2012, where he found that Hannah had reached MMI on February 27, 2005.

Dr. Kriss repeated his medical findings from his first evaluation. However,

Hannah continued to file regular status reports stating he had not reached

MMI. The UEF continued to pay TTD and medical benefits.

      In July 2011, the UEF filed a motion to join Negroe as a party. The

motion was granted, and Negroe filed a motion to have the claim returned to

the active docket. She argued that the UEF had a good faith basis to terminate

payment of TTD benefits to Hannah six years earlier. The UEF then filed liens

against Negroe's Hardin County real estate, including her personal home.

      In October 2012, Negroe filed a motion to terminate the payment of

Hannah's TTD benefits. She submitted Dr. Kriss's independent medical

examinations from May 2009 and September 2012 in support of her motion.

The ALJ, on October 19, 2012, terminated the payment of Hannah's TTD

benefits.

      After a hearing, the ALJ issued an opinion, award, and order in April

2014. He again found that Hannah was an employee of Terry at the time of the

work-related injury. Thus, Negroe, Baker, and PBD were not Hannah's

employer and since there was no workers' compensation insurance, the UEF

was responsible to pay all benefits. The ALJ further found that Hannah

suffered a 5% functional impairment rating from the compression fracture. He

                                        5
then adopted Dr. Kriss's finding that Hannah reached MMI on February 27,

2005. Therefore, Hannah's entitlement to TTD ended on that date, and the ALJ

awarded the UEF a dollar-for-dollar credit against Hannah's permanent partial

disability ("PPD") award for any overpayment of TTD made after that date. The

ALJ also found that Hannah's continued use of narcotics was unreasonable

and not compensable. A petition for reconsideration filed by Hannah was

denied.

      The Board affirmed the ALJ's opinion, award, and order, but vacated and

remanded only for the A1.0 to consider whether Hannah was entitled to an

additional 1% impairment rating due to a pinched nerve in his left thigh. The

Board also ordered the ALJ to award PPD benefits from the date of injury with

payment of those benefits to be suspended during any period when TTD was

paid. The Board agreed that Negroe, Baker, and PBD were not Hannah's

employers and that Negroe and PBD did not have up-the-ladder liability. Both

Hannah and the UEF filed an appeal to the Court of Appeals.

      The Court of Appeals affirmed in part, vacated in part, and remanded the

matter to the ALJ. The Court of Appeals agreed with the ALJ that Terry was

Hannah's employer and that PBD and its partners did not have up-the-ladder

liability. The Court of Appeals also affirmed the finding that Hannah had

reached MMI on February 27, 2005, but disagreed with the ALJ's finding that

the UEF was entitled for a dollar-for-dollar credit of any overpayment of TTD

benefits from that date. The Court of Appeals found that since the agreed

order stated that the ALJ had to enter an order to terminate the UEF's payment

                                       6
of TTD benefits to Hannah, and no such order had been entered, the UEF was

not entitled to discontinue payment of the benefits until that order was

entered, October 19, 2012. Thus, the Court of Appeals held that the correct

date the dollar-for-dollar credit ran from was October 19, 2012. This appeal

followed.

      The Board's review in this matter was limited to determining whether the

evidence is sufficient to support the ALJ's findings, or if the evidence compels a

different result.   W. Baptist Hosp. v. Kelly, 827 S.W.2d 685, 687 (Ky. 1992).

Further, the function of 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." Id. at 687-88. Finally, review

by this Court "is to address new or novel questions of statutory construction,

or to reconsider precedent when such appears necessary, or to review a

question of constitutional magnitude." Id. The AI.AJ, as fact-finder, has the sole

discretion to judge the credibility of testimony and weight of evidence.

Paramount Foods, Inc. v. Burkhardt, 695 S.W.2d 418 (Ky. 1985).

      The UEF's first argument is that Negroe, Baker, and PBD are responsible

to pay Hannah's workers' compensation benefits under KRS 342.610(2). KRS

342.610(2), the up-the-ladder statute, states:

            (1) Every employer subject to this Chapter shall be liable for
            compensation for injury, occupational disease, or death without
            regard to fault as a cause of the injury, occupational disease, or
            death.
            (2) A contractor who subcontracts all or any part of a contract
            and his or her carrier shall be liable for the payment of

                                           7
         compensation to the employees of the subcontractor unless the
         subcontractor primarily liable for the payment of such
         compensation has secured the payment of compensation as
         provided for in this chapter. Any contractor or his or her carrier
         who shall become liable for such compensation may recover the
         amount of such compensation paid and necessary expenses
         from the subcontractor primarily liable therefor. A person who
         contracts with another:
                   (a) To have work performed consisting of the
                  removal, excavation, or drilling of soil, rock, or
                  mineral, or the cutting or removal of timber from
                  land; or
                  (b) To have work performed of a kind which is a
                  regular or recurrent part of the work of the
                  trade, business, occupation, or profession of
                  such person shall for the purposes of this
                  section be deemed a contractor, and such other
                  person a subcontractor. This subsection shall
                  not apply to the owner of lessee of land
                  principally used for agricultural.

General Electric Co. v. Cain, 236 S.W.3d 579, 588 (Ky. 2007), states:

      Work of a kind that is a 'regular or recurrent part of the work of
      the trade, business, occupation, or profession' of an owner does
      not mean work that is beneficial or incidental to the owner's
      business or that it is necessary to enable the owner to continue in
      business, improve or expand its business, or remain or become
      more competitive in the market. It is work that is customary,
      usual, or normal to the particular business (including work
      assumed by contract or required by law) or work that the business
      repeats with some degree of regularity, and it is of a kind that the
      business or similar business would normally perform or be
      expected to perform with employees.

      The UEF argues that PBD and Negroe are up-the-ladder employers and

are responsible for Hannah's workers' compensation benefits because the

development of a subdivision includes the construction of houses. Thus, the

UEF argues that the construction of houses is a regular or recurrent part of the

work of the trade, business, occupation, or profession that PBD and its

investors were involved in. The UEF cites to the fact that the contract entered

                                        8
into between Terry and Negroe stated he was the manager of PBD and opened

an account in PBD's name to purchase lumber for the construction of Negroe's

house. Additionally, the UEF notes that Terry took profits from the

construction of Negroe's house and reinvested it into PBD. We disagree with

the UEF's argument.

      There is no evidence that PBD was in the regular and recurrent business

of constructing houses. There is also no evidence that the construction of

houses was customary or normal to PBD's business. Instead, PBD only

developed a subdivision in which it would sell lots to individuals to build their

own houses. Further, there is no evidence Negroe planned to build any other

houses in the development. The house Negroe was building was to be a home

for her family and not for investment purposes. The ALJ's findings are

supported by substantial evidence and shall not be disturbed.

      The UEF's second argument is that KRS 342.700(2) attaches up-the-

ladder liability to the defendants because they acted as contractors and sub-

contractors. That statute states in pertinent part:

         (1) Whenever an injury for which compensation is
         payable under this Chapter has been sustained
         under circumstances creating in some other person
         than the employer a legal liability to pay damages,
         the injured employee may either claim
         compensation or proceed at law by civil action
         against the other person to recover damages, or
         proceed both against the employer for
         compensation and the other person to recover
         damages, but he shall not collect from both . . .
         (2) A principal contractor, intermediate, or
         subcontractor shall be liable for compensation to
         any employee injured while in the employ of any
         one (1) of his intermediate or subcontractors and

                                        9
          engaged upon the subject matter of the contract, to
          the same extent as the immediate employer ..
          This subjection shall apply only in cases where the
          injury occurred on, in, or about the premises on
          which the principal contractor has undertaken to
          execute work or which are under his control
          otherwise or management.

      The UEF believes PBD, Negroe, and Baker are bound as up-the-ladder

employees because the agreement between Negroe and Terry to construct her

house bound the members of the development group. However, there is little

evidence that Terry was authorized by PBD to construct houses on its behalf.

The evidence indicates that PBD was organized only to develop a subdivision

and sell building lots. There is also no indication that any of the money Terry

received for building Negroe's house was required to be placed in PBD

accounts. While Terry voluntarily invested some proceeds into PBD, there is no

evidence he was required to do so. The AU did not err by finding that Terry

was Hannah's employer and the other defendants did not share up-the-ladder

liability for paying his benefits.

      We also note that the UEF argues that Negroe acted as a general

contractor of the construction of her house, and therefore is responsible under

KRS 342.700(2) to pay for Hannah's benefits. However, the record does not

support this conclusion. Negroe did not supervise the work being completed at

her house until the end of construction after Terry was fired. She was living in

Mexico when construction began and was only acting and making decisions a

prospective homeowner would make. She did not make direct payments to the

individuals building her house, did not provide tools or materials to any of the

                                        10
subcontractors, and did not control or direct their work. The ALJ did not err

by finding that Negroe is not responsible for the payment of Hannah's workers'

compensation.

      The UEF's final argument is that the Court of Appeals erred by finding it

is not entitled to a dollar-for-dollar credit for the TTD it paid Hannah after the

date it was determined he reached MMI, February 27, 2005. The UEF argues

that while the agreed order did state that TTD benefits were to be paid until the

ALJ entered an order ending such payments, there is no authority for TTD

benefits to be paid after MMI was reached. We disagree.

      KRS 342.0011(11)(a) provides that TTD is "the condition of an employee

who has not reached [MMI] from an injury and has not reached a level of

improvement that would permit a return to employment." Thus, in a normal

claim, once Hannah reached MMI, he would no longer be entitled to TTD

benefits. However, the parties agreed that Hannah would receive TTD benefits

until the ALJ -issued an order stopping those benefits. Thus, Hannah was

entitled to TTD benefits, by agreement of the parties, until the ALJ rendered his

order on October 19, 2012 terminating those benefits. While payment of TTD

benefits after that date could have constituted overpayment against which the

UEF could claim a credit, payment of TTD benefits before that date did not

constitute an overpayment and no credit is available.

      Thus, for the above stated reasons, we affirm the decision of

the Court of Appeals.

      All sitting. All concur.

                                         11
COUNSEL FOR APPELLANT,
UNINSURED EMPLOYERS' FUND,
COMMONWEALTH OF KENTUCKY:

Charles Davis Batson

COUNSEL FOR APPELLEE,
POPLAR BROOK DEVELOPMENT, LLC.:

Matthew C. Hess

COUNSEL FOR APPELLEE,
BARBARA NEGROE:

Brent Dye

COUNSEL FOR APPELLEE,
TIMOTHY HANNAH:

Larry Duane Ashlock

COUNSEL FOR APPELLEE,
CALVIN BAKER:

Not represented by counsel

COUNSEL FOR APPELLEE,
BRIAN TERRY:

Not represented by counsel

                              12