Insurer can pursue reimbursement for employer's safety violation

In Kentucky, an employer and its insurer can enter into a contract providing for the reimbursement of payments the insurer has made in excess of the benefits regularly provided by workers' compensation law.

Case name: Kentucky Associated General Contractors Self-Insurance Fund v. Music Construction, Inc., No. 2008-SC-000795-DG (Ky. 10/29/09).

Ruling: The Kentucky Supreme Court held that the insurance carrier could seek reimbursement from the employer for the increase in benefits it paid to an injured worker based on the employer's failure to comply with safety regulations.

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What it means: In Kentucky, an employer and its insurer can enter into a contract providing for the reimbursement of payments the insurer has made in excess of the benefits regularly provided by workers' compensation law.

Summary: A construction worker was severely injured when a trench collapsed on him. The employer had violated safety regulations, and the worker received the applicable 30 percent increase in workers' compensation benefits. The employer's contract with the insurer required reimbursement to the insurer if the insurer was required to make additional payments because of the employer's failure to comply with health or safety laws or regulations. The employer argued that it was not required to reimburse the insurer for the increased benefits, as the insurer should have included the risk of loss when it set the employer's premium. It further argued Kentucky law requires an insurer to agree to promptly pay all benefits and construes the agreement as a promise to the worker, who may face additional risk if the insurer does not compensate him in full. The Supreme Court rejected the employer's arguments, holding that this was a contract case and not a workers' compensation case. It determined the employer and insurer had a separate contract to which the injured worker was not a party. Therefore, the question of reimbursement was dependent on the terms of the contract, not the insurer's liability to the worker.

The employer violated the state's occupational safety and health act by failing to protect employees from a cave-in by placing a spoil pile too close to the excavation; by failing to have a properly trained person inspect the excavation daily for the possibility of a cave in; and by failing to provide an adequate protection system, such as sloping or shoring the walls of the trench.

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December 28, 2009

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