Adjuster's conduct unravels employer's statute of limitations defense

The Kentucky Supreme Court held that a workers' compensation insurer's conduct reasonably induced the claimant to file his claim late. As a result, the insurer was estopped from asserting a statute of limitations defense.

Case name: Hitachi Automotive Products USA, Inc. v. Craig, et al., No. 2007-SC-000631-WC (Ky. 10/23/08).

What it means: An employer may be estopped from raising a limitations defense when the conduct of its insurance carrier causes the claimant to believe that a settlement will be reached, leading the claimant to hold off on filing a claim. The claimant has the burden of proving that the carrier's conduct reasonably induced the late filing.

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Summary: The claimant injured his back at work while helping to lift a heavy pallet. The employer paid temporary total disability and medical benefits voluntarily but terminated TTD compensation when the claimant returned to work. When the claimant filed a claim, the employer contended that the statute of limitations had run because two years had elapsed since it terminated TTD compensation. The claimant argued that the employer should be estopped from asserting a limitations defense because the conduct of the plant nurse and the adjuster "lulled him into thinking that the carrier would offer a settlement and that he would not need to file a claim." The Supreme Court agreed with the Court of Appeals that the carrier was estopped from asserting the limitations defense.

In response to questions posed by the adjuster, the claimant's surgeon indicated that the claimant had a 13 percent permanent impairment and that no portion of the rating was attributable to a preexisting or unrelated condition. During a conversation between the claimant and the adjuster regarding the rating, the adjuster stated that she believed some of the rating should be attributed to previous back injuries and surgery. In response, the claimant explained that the surgeon told him he was "100 percent" after a previous surgery. The adjuster said "okay" and had no further contact with the claimant until she informed him that the limitations period had expired.

The Supreme Court reasoned that the adjuster violated state regulations by failing to advise the claimant whether she would accept or deny his claim, failing to inform him that she needed additional information, and failing to provide specific reasons in writing for denying permanent income and medical benefits, if that was her position. Stating "equity will not permit a carrier or its principal to blatantly disregard the obligations created by [state regulations] and benefit from the misconduct," the court concluded that equity required the employer to be estopped from asserting a limitations defense.

January 8, 2009

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