Commonwealth of Kentucky, Uninsured Employer's Fund v. Michael Brock
2016 SC 000111
| Ky. | Feb 14, 2017Background
- Michael Brock was severely injured in 2007 while doing gravel work on a building project on property owned by HBC Leasing (HBC).
- Brent Owen, owner of O & O Builders, agreed to act as general contractor and hired Brock; Owen had no workers' compensation insurance at the time.
- More Power Diesel, Inc. (MPD) carried workers' compensation insurance; MPD and HBC shared owners (three partners and their wives) and some commingled business activity, but MPD’s business was diesel repair and HBC’s was property leasing.
- The ALJ awarded Brock benefits and identified Owen (uninsured) as responsible; the Uninsured Employers’ Fund (UEF) sought to add MPD, HBC, and the individual owners, invoking "up-the-ladder" liability under KRS 342.610 and KRS 342.700.
- The ALJ and the Workers’ Compensation Board rejected UEF’s theory that MPD/HBC (or the individual owners) were contractors subject to up-the-ladder liability; the Court of Appeals affirmed, and the Supreme Court of Kentucky affirmed as well.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether MPD, HBC, or their owners are "contractors" subject to up-the-ladder liability under KRS 342.610/KRS 342.700 | UEF: MPD/HBC (and owners) should be liable because they contracted with Owen for construction and had close ties/commingling with MPD (insured entity) | MPD/HBC: They are not regular/recurrent construction contractors; Owen was the general contractor and solely responsible | Held: MPD and HBC (and owners) are not "contractors" for up-the-ladder liability; Owen was the contractor, so UEF’s assignment fails |
| Whether commingling of funds/relationships converts MPD/HBC into a contractor for up-the-ladder purposes | UEF: Commingling and overlapping ownership show MPD/HBC effectively engaged in the construction work | MPD/HBC: Commingling does not transform the nature of their businesses; the statutory test requires the contracted work be regular/recurrent to the entity’s own business | Held: Financial commingling does not satisfy the statutory requirement; substantial evidence supports finding they were not regularly engaged in construction |
Key Cases Cited
- Square D Co. v. Tipton, 862 S.W.2d 308 (establishes ALJ's role as factfinder in workers' comp proceedings)
- Magic Coal Co. v. Fox, 19 S.W.3d 88 (ALJ may accept or reject testimony and weigh evidence)
- General Electric Corp. v. Cain, 236 S.W.3d 579 (explains "regular or recurrent" test for KRS 342.610 up-the-ladder liability)
- REO Mechanical v. Barnes, 691 S.W.2d 224 (defines "compelling evidence" standard to overturn ALJ findings)
- Burton v. Foster Wheeler Corp., 72 S.W.3d 925 (burden on party seeking up-the-ladder liability to prove elements)