HOUSE BILL 2 – KENTUCKY CHANGES TO WORKERS’ COMPENSATION STATUTES FROM MARCH 2018 LEGISLATIVE SESSION – EFFECTIVE JULY 14, 2018.
By Steve Armstrong, Armstrong and Peake PLLC
Kentucky Workers’ Compensation Act - 2018 Kentucky Legislative session House Bill 2.
The new amendments to the Kentucky Workers’ Compensation Act take effect July 14, 2018.
KRS 342.020 – (applies July 14, 2018 forward- not retroactive) Section 3A states that all permanent partial disability claims not involving an injury described in subsection 9, the employer's obligation to pay the benefits shall continue for 780 weeks from the date of injury or date of last exposure. Subsection 9 is regarding injury or disease resulting in amputation or partial amputation of arm, hand, leg, foot, permanent partial or permanent total paralysis, etc.
Section 3 (b) requires the Commissioner to advise the employee of the right to file an application in writing. Notice by the Commissioner shall be made to employee 754 (14.5 years) weeks from the date of injury or last exposure. (by letter? - statute says “in writing”)
If the employee fails to file this application, then future treatment is deemed not work related and the employer has no remaining liability.
Comment: Insurers and TPAs need to make sure they have a good and valid address for the claimant in the EDI system at all times so that the notice letter sent by the State actually gets to the claimant. The goal is that claimant receive the notice letter in order to avoid application of this new statute of limitations. We do not want the claimant to say that he/ she did not receive the notice.
Section 3 (c) states that employee shall receive continuation of benefits for an additional time beyond the period provided in 3A - which is 780 weeks (15 years) - so long as the continued medical treatment is reasonable and necessary and related to the work injury or occupational disease if:
1. Employee files an application within 75 days prior to the termination of the 780-week period:
2. Employee demonstrates the continued medical treatment is reasonably necessary and related to the work injury or occupational disease: and
3. Administrative law judge determines and orders that continued benefits are reasonably necessary and related to the work injury or occupational disease for an additional time beyond the original 780-week period provided above.
Section 3 (d) - If administrative law judge determines that medical benefits are not reasonable and necessary or not related to the work injury or occupational disease, or if the employee fails to make a proper application, then "any future medical treatment shall be deemed to be unrelated to the work injury and the employer's obligation to pay medical benefits shall cease permanently."
Comment: This puts the burden on to the claimant. (Currently, under Mitee v Yates, 865 S.W. 2d 654 (Ky. 1993) and other cases, the payment obligor has the burden of proof post settlement / post award to show that treatment is not reasonable and necessary). The claimant now has to file and application and has to prove entitlement to a Judge. This is a great relief to employer – if the Kentucky Supreme Court allows this. The obvious purpose of this new statute is to limit medical treatment to a defined period, because up until now, future medical treatment has been for life. Years ago, we had an argument that the treatment was only reasonable and necessary for the duration of the permanent partial disability award, which is generally 425 weeks. The Kentucky Supreme Court did away with that. 780 weeks is 15 years. The obvious intent is to cap medical benefits for many cases at 15 years total. It places the burden of proof that treatment is reasonably necessary, and work related on the employee and essentially requires a judge to make a finding that the treatment is reasonably necessary, and work related. The burden of proof is placed on the plaintiff to make an application for medical benefits within this time frame.
These changes do not seem to effect the 30-day rule for reopening post award/ post settlement found in Westvaco v. Fondaw, 698 S.W.2d 837, 839 (Ky. 1985) and Mitee v Yates, 865 S.W. 2d 654 (Ky. 1993).
This attorney’s belief is that this statute effectively upends several Kentucky Supreme Court decisions. For example, in 2007, the Kentucky Supreme Court ruled that a finding by a Judge that a work-related injury produces a permanent impairment rating (an AMA rating), compels a finding that a worker is entitled to an award of future medical benefits for life. See FEI Installation, Inc. v. Williams, 214 S.W.3d 313 (Ky. 2007) (An ALJ may award medical expenses even in the absence of permanent disability because it is possible for a non-disabling injury to require medical care.) In 2011, the Kentucky Supreme Court ruled that a judge may be forced to award future medical benefits even if there is no AMA rating if permanent hardware is left the employee’s body following surgery. Kroger v Ligon, 338 S.W.3d 269 (Ky. 2011). An employee only has to show that there was a “harmful change in the human organism” that was permanent, and does not have to show there was an AMA rating. (City of Madisonville v Barnes, 2010-CA-000585-WC, (June 10, 2011)).
Section 13A - In a case that employers, insurers, or payment obligors (think TPAs) shall not be liable for urine drug screens of patients in excess of:
1. One per year for a patient considered to be a low risk;
2. Two per year for a patient considered to be moderate risk; and
3. Four per year for patients considered to be high risk.
The employer, insurer or medical payment obligor may be liable for urine drug screen at each office visit where the patients have exhibited apparent behavior, multiple requests for early refills of prescriptions, multiple providers prescribing or dispensing opioids, etc.
C. Employer, insurer or medical payment obligor may request additional urine drug screenings.
D. The commissioner shall put forth administrative regulations regarding urine drug screenings as part of practice parameters.
KRS 342.035 section 5 (c) (retroactive) was amended to indicate that utilization review may be waived if the insurance carrier, self-insured group or self-insured employer agrees that the recommended medical treatment is reasonably, medically and necessary and appropriate, or if the injured employee elects not to proceed with the recommended medical treatment.
Section 7 was admitted to read that a medical provider shall not charge a fee when the initial copy of medical records is provided to the injured worker or his or her attorney in response to a written request pursuant to KRS422.317.
Section 8 requires the Commissioner to develop or adopt practice parameters for evidence-based treatment guidelines for medical treatment including chronic pain management and opioid use, on or before December 31, 2019.
Section b - The Commissioner shall develop a pharmaceutical formulary for medications on or before December 31, 2018.
Section c - Provider medical services who follow this practice parameters or treatment guidelines or formularies developed or adopted and implemented pursuant to the Section B shall be presumed to have met the appropriate legal standard of care.
KRS 342.040 – (July 14, 2018 forward)
Section 1 requires TTD upon showing seven consecutive days of disability, and is payable on day eight. Six percent interest (no longer 12% as of June 28, 2017). At day 15, the employer must pay the waiting period which is the first seven days. All income benefits shall be payable on the regular payday of the employer with 6% interest for past due benefits. Except if the administrative law judge determines that the delay is caused by the employee, then no interest shall be due. Or if the administrative law judge determines that a delay denial or a termination was without reasonable foundation, then the interest rate shall be 12%.
Comment: Now, where the employee causes delay, employers should not owe interest. We are often asked when or how often TTD must be paid, and the existing statute indicates that income benefits "shall be due and payable not less often than semi-monthly."
KRS 342.125 - Re-opening Statute. (retroactive)
Section 3. Negates a recent Kentucky Supreme Court decision allowing a chain reopening (Hall v. Hospitality Resources, Inc., 276 S.W. 3d 775 (KY. 2008)) every four years. Now, four years means four years- not four years after the last order or ALJ decision. No claim shall be reopened more than four years after the date of the original award and original order granting or denying benefits when such an award or order becomes final and appealable. The exception is of course for compensability of medical expenses, fraud, or conforming the award for the triple or double multiplier, or for reducing permanent total disability award when an employee returns to work, etc.
KRS 342.185 - New Section 3 (retroactive) - Right to compensation from cumulative trauma injury shall be barred unless notice of the cumulative trauma injury is given within two years from the date that the employee is told by a physician that the cumulative trauma injury is work related. A hearing request has to be made within two years after the employee is told by the physician that the cumulative trauma injury is work related. However, the right to compensation for any cumulative trauma shall be forever barred unless an application for adjustment of claim is filed with the commissioner within five years after the last injurious exposure to the cumulative trauma.
So, we have here a new statute of limitations enacted and a statute of repose.
Question: What is the best way that an employer can determine how and when an employee is told that the cumulative trauma is due to work activities? In writing? In person? There does not seem to be a writing requirement?
Comment: This 5-year limitations is very helpful to employers.
KRS 342.265 - Settlement Agreement Statute - Amended that lump sum settlement of future periodic payments at $40 or less, the commissioner shall fix the discount rate based on the interest rate paid upon the 10-year T-bill as of August 1 the preceding year.
KRS 342.315 - Injuries for workers who have had injuries or occupational hearing loss, the commissioner must still contract with the University of Kentucky and University of Louisville Medical Centers to evaluate workers. Likewise with occupational diseases, the same is true.
KRS 342.316 - Section 3(b)(2) - This is the occupational disease and black lung statute. - If spirometric testing is not valid due to inadequate cooperation or poor effort on the part of the claimant, claimant's right to take or prosecute any proceedings shall be suspended until the refusal or obstruction ceases. No compensation shall be payable for the period for which the refusal or obstruction continues.
Other amendments include - Qualified B readers are required. The commissioner shall audit performance of physicians and facilities selected to perform examinations.
Further comment is deferred but there are additional changes to this coal workers' pneumoconiosis/black lung statute.
KRS 342.320 - Attorney fees for plaintiff's attorneys are now subject to a maximum fee of $18,000.00 which is increased from $12,000.00. This barely keeps up with inflation since 1996 Act. No mention of increase for inflation.
Section 3 - Liability shall not apply to injury, occupational disease or death of the employee if the employee willfully intended to injure or kill himself, herself or another.
Comment: This is a fairly radical change to the intentional injury statute. This gives an employer a defense if the employee willfully intends to injure himself or kill himself or kill another. What if the workers are fighting over a work issue?
Section 4 - If the employee voluntarily takes an illegal non-prescribed substance or a prescribed substance or substances in an amount of excess of the prescribed amounts detected by blood, as measured by a scientifically reliable test, that could cause a disturbance of mental or physical capacities, it shall presumed that the illegal unprescribed substance or the substances or the prescribed substance or substances in excess of the prescribed amounts caused the injury, occupation disease, or death, and liability shall not apply to the injury, disease or death to the employee.
Comment: Again this is a radical change in the statute. Complete 180-degree turn. This flips the old statute on its head. Under the old intoxication statute, the employer not only had to show intoxication, but also had to show causation. This statute presumes causation if there is intoxication.
Test the employee for drugs and alcohol!! The employer still has to show the positive test! That part is still the employer burden of proof.
KRS 342.700 - Subrogation Statute (not retroactive)
The employer or insurer may recover from the third party not to exceed indemnity and medical expenses paid and payable to or on behalf of the injured employee thus a pro rata share of the employee's legal fees and expense.
Comment: This is an obvious change and hopefully a rebuke (well deserved!) to the Kentucky Supreme Court ruling in AIK Selective Self Insurance Fund v. Bush, 74 S.W. 3rd 251 (2002), and AIK v. Minton 192 S.W.3d 415 (KY 2006). Frankly, the changes did not go far enough. It is unclear exactly how this will play out. Before AIK v. Bush in 2002, specifically back in the 1990s, an employer/insurer often received 50 cents on the dollar for subrogation claims. Then plaintiff's attorneys got wise and started saying that their entire settlement was for pain and suffering – the settled out from under us. Then came AIK v. Bush and AIK v. Minton where the Kentucky Supreme Court ruled that the bigger the plaintiff's attorney's fees, the less likely the employer/insurer was to achieve any subrogation recovery.
In AIK Selective Self Insurance Fund v. Bush, 74 S.W. 3rd 251 (2002), the trial judge did not permit the insurer, AIK, to recoup from the Judgment any amount of the workers’ compensation benefits it had paid to the plaintiff. The insurer asserted it was entitled to reimbursement of its entire set of medicals paid and payable, and lost wages. The Supreme Court, on appeal, ruled that the insurer was entitled to recoup a pro rata portion of its benefits consistent with the Judgment in the case, but held that the plaintiff’s attorney fees stand first in line for payment before the insurer could recoup any of the monies it paid to or on behalf of the plaintiff. The Court stated that AIK was entitled to recoup its payments, but that “from all of which must be deducted Bush’s fees and expenses incurred in the prosecution of this action, to the extent that such have not already been paid by Dixon (one of the defendants)…” (Id., at 253). AIK, of course, argued that that ruling was incorrect and that the statute KRS 342.700 should only award or support attorney fees to the plaintiff’s attorney on a pro rata share of the recovery to the insurer or employer, meaning that the plaintiff/employee’s attorney would only get perhaps a third of the recovery that the insurer or employer received.
Is that what we will be returning to? (Plaintiff’s attorney gets 1/3 of our recovery) That would certainly be an improvement over everything we have been subjected to since 2002.
What does a pro rata share of the employee's legal fees and expense mean? That remains to be seen, but it has to be better than AIK Selective Self-Insurance Fund v. Bush, KY 74 S.W.3d 251 (2002) and in AIK Selective Self-Insurance Fund v. Minton, Ky, 192 S.W.3d 415 (2006).
KRS 342.730 - TTD and PTD claims are now capped at 110% of the state average weekly wage, instead of 100%.
Comment: This is an obvious bone thrown to plaintiffs and their attorneys. This increases recovery to benefits by raising the cap on income benefits. So, the plaintiff's attorneys get a raise and the plaintiffs get a raise as well.
Likewise, in Section B, PPD claims are raised to 82.5% of the state average weekly wage instead of 75%. Thus, we can expect higher PPD, TTD and PTD outcomes as well.
Section 4 – Reinstitutes an age cap. All income benefits terminate at age 70 or four years after the employee's injury or last exposure, whichever last occurs. So, if a 69-year-old claimant is injured, that claimant still gets four years because the four-year limitations ends later than age 70. A 65-year-old claimant, by contrast, would have his or her income benefits end at age 70.
Comment: This is an obvious and well-needed legislative overruling of the recent Kentucky Supreme Court case in Parker v. Webster County Coal, LLC, 529 S.W.3d 759 (Ky. 2017). If the Kentucky legislature did nothing more than make this one change, this Act would have been a success. This was very much needed.
Section 6. There is an offset for employer exclusively-funded disability plans, exclusively-funded disability retirement plans, and exclusively employer-funded sickness and accident plans, and salary continuation. This adds disability retirement plans, and salary continuation. This may be very helpful to some employers.
There is still no statute on TPD, but see new section 7 below.
New Section 7 (RETROACTIVE) - Income benefits payable for TTD during the period the employee has returned to a light duty or to alternative job position shall be offset by an amount equal to the employee's gross income minus applicable taxes during the period of light duty or work in an alternative job position. This is somewhat of a rebuke to prior supreme court cases from the early 2000s. This encourages employers to offer work, but the problem again is that where it states the employee "has returned to" a light duty job.
· What if the employee does not return?
· What if the employee refuses to return to the light duty or alternative job position?
KRS 342.7305(4) –
When audiograms reveal hearing loss consistent with hazardous noise exposure, there is a rebuttable presumption that the hearing impairment is an injury covered by this chapter and for the employer with whom the employee was last injuriously exposed to hazardous noise for a minimum of one-year employment shall be exclusively liable for benefits. This new phrase "for a minimum duration of one year of employment" is the key addition. Theoretically under the old statute, a claimant could work for a week or two or three days and receive benefits for hearing loss. This minimum duration of one year of employment is very helpful to employers on hearing loss claims. Obviously, the claimant has to work for a year before he or she can claim benefits.
Comment: Does this mean that the employee should be looking back to the prior employer for income benefits? What happens if the evidence is that the last employer and the second to the last employer are both partially responsible for the hearing loss?
KRS 342.732(1)(a)5 requires the employee to notify parties of his or her intention to retrain within 30 days for a retraining incentive benefit for occupational pneumoconiosis/black lung. Employee must initiate retraining within 365 days from the administrative law judge's final order. This is helpful to the coal industry because it requires the claimant to either retrain or not retrain within a very limited time period. It is helpful because the claimant cannot wait five years.
Section five requires the Department of Workers' Claims to create an online portal through which employees shall select a facility or institution to provide their retraining.
Comment: As the coal industry decreases in Kentucky, there are fewer and fewer of these claims.
KRS 342.749 – Black Lung. Requires the commissioner to maintain a list of B reader physicians who are licensed in the commonwealth and who are board certified pulmonary specialists. Thus, a B reader now has to be a board certified pulmonary specialist in addition to simply being a B reader. The statute further defines what a board certified pulmonary specialist is and eliminates whole sections of the statute regarding B readers.
Comment: This statute is only applicable to the coal industry and those associated with coal where an employee may be exposed to coal dust. Further comment is deferred.
KRS 342.020 above is effective on or after the effective date of the act. KRS 342.040 is effective as well only on or after the effective date of the act. KRS 342.700 likewise is effective on or after the date of the effective date of the act.
Some of this Act is remedial and should apply to all claims irrespective of the last date of injury. If the ALJ decision is final, the amount of the indemnity ordered or awarded shall not be reduced and the duration of medical benefits shall not be limited. But if the claim is still in litigation, then certain provision apply retroactively to ongoing litigated claims: KRS 342.035, KRS 342.125, KRS 342.185, section seven of KRS 342.730.
Subsection four of KRS 342.730 "shall apply prospectively and retroactively to all claims". Thus, the legislature really wants to do away with the Kentucky Supreme Court ruling in Parker v. Webster County Coal, LLC, 529 S.W.3d 759 (Ky. 2017). This applies to all claims for which the date of injury or last exposure occurred on or after December 12, 1996 and which have not been fully and finally adjudicated or are in the appellate process or for which the time to file an appeal has not lapsed.
 “Consistent with this Court's interpretation that KRS 342.020(1) shifts to the employer the burden to prove that contested medical expenses are unreasonable or unnecessary, we also believe that it places on the employer an affirmative burden to prove that contested medical bills were received no more than 30 days before the motion to reopen was filed.” (See Mitee v Yates, 865 S.W. 2d 654, at 656 (Ky. 1993)).