MCCOY ELKHORN COAL CORPORATION -INSOLVENT EMPLOYER; KENTUCKY COAL EMPLOYERSSELF-INSURANCE FUND AND ITS THIRD-PARTY ADMINISTRATOR HEALTHSMART APPELLANTS
JEANNIE SARGENT, AS WIDOW, PERSONAL REPRESENTATIVE, ADMINISTRATRIX OF THE ESTATE OF FARLEY SARGENT, II (DECEASED) AND JEANNIE SARGENT AS GUARDIAN OF THE MINOR CHILDREN OF FARLEY SARGENT, II: JOSHUA SARGENT, ALYSSA SARGENT AND SARAH SARGENT; AND JOSHUA SARGENT, UPON REACHING THE AGE OF EIGHTEEN; ANDHONORABLE JEANIE OWEN MILLER, ADMINISTRATIVE LAW JUDGE; AND WORKERS' COMPENSATION BOARD APPELLEES
FOR REVIEW OF A DECISION OF THE WORKERS' COMPENSATION
BOARD ACTION NO. WC-12-80645
Smith Walters J. Gregory Allen Pikeville, Kentucky BRIEF FOR
Downey Pikeville, Kentucky BRIEF FOR APPELLEE:
BEFORE: ACREE, DIXON, AND JONES, JUDGES.
Elkhorn Coal Corporation - Insolvent Employer, Kentucky Coal
Employers Self-Insurance Fund (KCESIF) and its third-party
Administrator, HealthSmart, petition for review of an opinion
of the Workers' Compensation Board affirming an ALJ's
award of benefits to the surviving spouse and children of
Farley Sargent, II (collectively Sargent). The sole issue
presented is the ALJ's determination KCESIF is
responsible for payment of enhanced benefits as a result of
intentional safety violations by McCoy Elkhorn, which caused
the accident. Finding no error, we affirm.
Sargent was killed in a mining accident while employed by
McCoy Elkhorn. The Mine Safety and Review Commission issued
citations to McCoy Elkhorn for violating safety regulations
relating to its roof safety plan. The ALJ determined McCoy
Elkhorn committed intentional safety violations that caused
Sargent's death and awarded enhanced benefits pursuant to
Kentucky Revised Statute (KRS) 342.165(1). The statute
states, in relevant part:
If an accident is caused in any degree by the intentional
failure of the employer to comply with any specific statute
or lawful administrative regulation made thereunder . . . the
compensation for which the employer would otherwise have been
liable under this chapter shall be increased thirty percent
(30%) in the amount of each payment.
does not dispute the ALJ's finding of intentional safety
violations pursuant to KRS 342.165(1); rather, it challenges
the ALJ's determination KCESIF is obligated to pay the
30% increased benefit.
found AIG/AIU Ins. Co. v. South Akers Mining Co.,
LLC, 192 S.W.3d 687 (Ky. 2006), to be applicable to the
case at bar. In AIG/AIU, the insurance company
challenged the finding it was liable for enhanced benefits
awarded under KRS 342.165(1), relying on language in the
policy requiring the employer to pay any excess benefits
awarded due to the employer's non-compliance with safety
regulations. Id. at 688. The Court disagreed with
the insurance company's argument that enhanced benefits
for a safety violation were a "penalty" to be paid
by the employer rather than the insurance carrier,
explaining, in relevant part:
Although KRS 342.165(1) authorizes what has commonly been
referred to as a safety penalty and although the party that
pays more or receives less is likely to view the provision as
being a penalty, the legislature did not designate the
increase or decrease as such or include it in KRS 342.990.
Nor does KRS 342.165(1) imply that the legislature viewed the
increase or decrease as being the equivalent of punitive
damages. It authorizes an increase or decrease in
compensation if an "intentional failure" to comply
with a safety regulation contributes to causing an accident.
Notwithstanding the use of the word 'penalty' as a
metaphor in Apex Mining v. Blankenship, 918 S.W.2d
225 (Ky. 1996), Whittaker v. McClure, 891 S.W.2d 80,
84 (Ky. 1995), and Ernst Simpson Construction Co. v.
Conn, 625 S.W.2d 850, 851 (Ky. 1981), it implies that
the increase or decrease serves to compensate the party that
benefits from it for the effects of the opponent's
Id. at 689. The Court concluded the insurance
company was liable for the award of enhanced benefits,
"despite a contractual term to the contrary."
argues AIG/AIU is inapplicable here because it is a
guaranty fund rather than an insurance carrier; consequently,
the assessment of the 30% enhanced benefit unfairly penalizes
KCESIF because the employer is insolvent. KCESIF relies on
KRS 342.910(2), which provides: "[E]ach guaranty fund
shall not be liable for the payment of any penalties or
interest assessed for any act or omission ...