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NOT TO BE PUBLISHED OPINION
THIS OPINION IS DESIGNATED "NOT TO BE PUBLISHED ."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THIS OPINION IS NOT TO BE PUBLISHED AND SHALL NOT BE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UNPUBLISHED KENTUCKY APPELLATE DECISIONS,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BY THE COURT SHALL BE SET OUT AS AN UNPUBLISHED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 : JUNE 19, 2008
TO BE PUBLISHED
,sulartme 911urf Of
2007-SC-000183-WC
UNINSURED EMPLOYERS' FUND APPELLANT
ON APPEAL FROM COURT OF APPEALS
2006-CA-000883-WC
WORKERS' COMPENSATION NO. 03-2186
CITY OF SALYERSVILLE ; MARTY SMITH;
E & D MOUNTAIN VIEW CONSTRUCTION ;
HONORABLE JOHN W. THACKER,
ADMINISTRATIVE LAW JUDGE ;
AND WORKERS' COMPENSATION BOARD APPELLEES
OPINION OF THE COURT
AFFIRMING
KRS 342.610(1) requires every employer that is subject to Chapter 342 to be
liable for workers' compensation benefits without regard to fault. KRS 342.610(2)(b)
includes among liable employers a "person" who contracts with another to have work
performed that is a regular or recurrent part of the person's trade, business, occupation,
or profession . KRS 342.630 identifies classes of employers that are subject to Chapter
342 . Finally, KRS 342 .690(1) states that Chapter 342 provides an employee's
exclusive remedy against an employer who secures the payment of workers'
compensation benefits or against the employer's employees .
An Administrative Law Judge (ALJ) determined that the City of Salyersville was a
contractor under KRS 342.610(2) and bore liability for the claimant's injury because his
direct employer was uninsured. The Workers' Compensation Board (Board) affirmed,
but the Court of Appeals reversed . It determined that KRS 342.610(2)(a) did not cover
the City's sewer project and that the claimant's work on the project was not a regular or
recurrent part of the City's business as required by KRS 342 .610(2)(b) . Although we
affirm, we do so because the City of Salyersville is not a "person" for the purposes of
Chapter 342 and is not liable under KRS 342.610(2) as an employer.
The claimant worked primarily as an excavator operator for E & D Mountain View
Construction, a company that constructed and installed water and sewer lines. He
alleged that he injured his back on September 23, 2003, in the course of installing
sewer lines in the City of Salyersville . He testified that he was on his knees in the
trench, jerking a spigot onto the belled end of a piece of sewer pipe, and felt back pain .
The mayor testified that the City's Water and Sewer Board provides utilities to its
residents, including sewer services, but that the City does not have the means to design
or construct sewer systems . He explained that it lacks the financial means, employees
with the training to design such a project, employees with the training to complete such
a project, and the necessary equipment . The mayor testified that Big Sandy Area
Development District helped the City obtain grants to finance the project and later
administered the grants with Summitt Engineering . Big Sandy ADD recommended
Summitt to design the project and to run bids for construction companies. It also
reviewed the bids with Summitt, recommended E & D as the contractor to install the
system, and prepared the City's contract with E & D. The contract required E & D to
maintain workers' compensation coverage and referred to the City as the "owner" and
to E & D as the "contractor." Summitt provided the construction supervisor. He stated
that the last system had probably been constructed in the 1940's or 1960's. The
present project had been underway for about seven and one-half years .
E & D obtained workers' compensation insurance coverage from KEMI, but the
policy expired on September 10, 2003. E & D did not attempt to renew it until
September 30, 2003, which was after the claimant's injury . Thus, KEMI informed the
Office of Workers' Claims that E & D was uninsured, and the Uninsured Employers'
Fund (UEF) was made a party when the claimant filed his application for benefits .
The ALJ determined that the injury entitled the claimant to receive permanent
partial disability benefits that were enhanced under KRS 342.730(1)(c) . Noting that E &
D did not have workers' compensation coverage on the date of the accident, the ALJ
found that the City bore "up-the-ladder" liability under both KRS 342 .610(2)(a) and (b).
The ALJ reasoned that the City was in the regular or recurrent business of providing
utility services, that E & D's work was to "facilitate the utility services," and that it
"consisted of the removal and excavation of soil in the laying of utility lines ." Thus, the
UEF was entitled to be reimbursed by E & D and by the City to the extent that E & D
was unable to do so .
The legislature repealed many provisions of the Workers' Compensation Act in
1972 and enacted new ones . Among the newly-enacted provisions were Ky. Acts ch .
78, §§ 1, 2(14), 3, and 9, which are presently numbered KRS 342 .610, KRS
342.0011(16), KRS 342.630, and KRS 342 .690 respectively . They are substantially the
same as when enacted .
KRS 342 .610(2)(b) states, in pertinent part, as follows:
A contractor who subcontracts all or any part of a contract
and his carrier shall be liable for the payment of
compensation to the employees of the subcontractor unless
3
the subcontractor primarily liable for the payment of such
compensation has secured the payment of compensation as
provided for in this chapter. . . . A erson 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 . . . . (emphasis added) .
KRS 342 .690(1) states, in pertinent part, as follows:
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
liabilit of such employer to the employee, his legal
representative, husband or wife, parents, dependents, next
of kin, and anyone otherwise entitled to recover damages
from such employer, at law or in admiralty on account of
such injury or death . For purposes of this section, the term
"employee' shall include a "contractor" covered by
subsection (2) of KRS 342 .610 , whether or not the
subcontractor has in fact, secured the payment of
compensation . . . . The exemption from liability given an
employer by this section shall also extend to such
employer's carrier and to all employees, officers or directors
of such employer or carrier, provided the exemption from
liability given an employee, officer or director or an employer
or carrier shall not apply in any case where the injury or
death is proximately caused by the willful and unprovoked
physical aggression of such employee, officer or director. ,
(emphasis added) .
If an injured worker's direct employer fails to provide workers' compensation
coverage, KRS 342.610(2)(b) deems the "up-the-ladder" contractor to be the employer.
KRS 342.690(1) then provides the contractor as well as to the contractor's employees,
officers, and directors with an exclusive remedy defense to potential tort liability .
General Electric Company v. Cain , 236 S .W.3d 579 (Ky. 2007), explains, however, that
4
the purpose of KRS 342.610(2)(b) is not to shield contractors from tort liability but to
assure that both contractors and subcontractors provide workers' compensation
coverage to their employees.
KRS 342.610(2) clearly describes a contractor as a "person." For the purposes
of Chapter 342, KRS 342.0011(16) defines a "person" as being "any individual,
partnership, limited partnership, limited liability company, firm, association, trust, joint
venture, corporation, or legal representative thereof." Although the definition may be
construed as including certain governmental entities, KRS 342 .630 makes it clear that
the legislature intended not to include governmental entities within the term "person."
KRS 342 .630 provides as follows:
The following shall constitute employers mandatorily subject
to, and required to comply with, the provisions of this
chapter:
(1) Any person, other than one engaged solely in agriculture,
that has in this state one (1) or more employees subject to
this chapter.
(2) The state, any agency thereof, and each county, city of
any class, school district, sewer district, drainage district, tax
district, public or quasipublic corporation, or any other
political subdivision or political entity of the state that has
one (1) or more employees subject to this chapter.
KRS 342 .630 considers persons and governmental entities to be separate
classes of employers subject to Chapter 342. Although KRS 342.630 requires both
classes to provide workers' compensation coverage to direct employees, KRS
342.610(2) considers only persons to be contractors . It does not hold a governmental
entity liable as the "up-the-ladder" employer of an uninsured subcontractor's employees
because a governmental entity is not a "person ." We note, however, that KRS
342.176.085 and KRS 45A.480 require persons who contract with the state to comply
5
with the Workers' Compensation Act and impose a fine on those who fail to do so.
Moreover, KRS 342.760 protects the employees of an uninsured employer by placing
secondary liability on the Uninsured Employers' Fund .
The City argued in its appeal to the Board that a governmental entity should not
be liable for workers' compensation benefits as a contractor or "up-the-ladder"
employer, but it failed to argue specifically that a municipal corporation is not a "person"
as defined in KRS 342.0011(16) or used in KRS 342 .610(2). The City also argued that
the construction and installation of sewer lines was not a regular or recurrent part of its
trade or business. The Board affirmed under KRS 342.610(2)(b), noting that the City
failed to address the ALJ's finding under KRS 342.610(2)(a) .
The Court of Appeals reversed, concluding that KRS 342.610(2)(a) was
inapplicable to the sewer project and that the finding against the City under KRS
342 .610(2)(b) was clearly erroneous . Thus, it also concluded that the City's newly
raised argument that it was not a person was moot.
The UEF asserts that the Court of Appeals erred by reversing the Board's
decision because the City failed to appeal the ALJ's finding under KRS 342 .610(2)(a)
and because substantial evidence supported the finding under KRS 342 .610(2)(b) . We
disagree .
The City has maintained from the outset that it is not a contractor under KRS
342.610(2). As noted in Mitchell v. Hadl , 816 S.W .2d 183,185 (Ky. 1991), and
previously in First National Bank of Louisville v. Progressive Casualty Insurance Co . ,
517 S .W.2d 226, 230 (Ky. 1974), the court normally confines itself closely to the
analysis and theories presented by the parties . To do so in the present case would,
however, result in a clear misapplication of KRS 342.610(2). Substantial evidence
could not support a finding against the City under a correct interpretation of either
subsection of KRS 342 .610(2) because the City is not a "person" and, therefore, could
not be a contractor for the purposes of imposing up-the-ladder liability . It is
unnecessary under the circumstances to consider whether KRS 342.610(2)(a) applies
to excavation for the purpose of installing sewer lines .
The decision of the Court of Appeals is affirmed .
All sitting . All concur.
COUNSEL FOR APPELLANT,
UNINSURED EMPLOYERS' FUND:
PATRICK M . ROTH
ASSISTANT ATTORNEY GENERAL
1024 CAPITAL CENTER DRIVE
SUITE 200
FRANKFORT, KY 40601-8204
COUNSEL FOR APPELLEE,
CITY OF SALYERSVILLE :
J . LOGAN GRIFFITH
WELLS, PORTER, SCHMITT & JONES
P .O . DRAWER 1767
PAINTSVILLE, KY 41240
COUNSEL FOR APPELLEE,
MARTY SMITH :
THOMAS G . POLITES
WILSON, POLITES & MCQUEEN
444 EAST MAIN STREET
SUITE 201
LEXINGTON, KY 40507
COUNSEL FOR APPELLEE,
E & D MOUNTAIN VIEW CONSTRUCTION :
J. THOMAS HARDIN
HARDIN LAW OFFICE
P.O. BOX 1416
I N EZ, KY 41224