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NOT TO BE PUBLISHED OPINION
THIS OPINION IS DESIGNATED "NOT TO BE PUBLISHED."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THIS OPINION IS NOT TO BE PUBLISHED AND SHALL NOT BE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UNPUBLISHED KENTUCKY APPELLATE DECISIONS,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BY THE COURT SHALL BE SET OUT AS AN UNPUBLISHED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NOT TO BE PUBLISHED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
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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
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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
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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
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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.
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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
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