Kentucky Employers Mutual Insurance v. Justin Thele

RENDERED: MARCH 25, 2022; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2021-CA-0414-WC
KENTUCKY EMPLOYERS
MUTUAL INSURANCE APPELLANT
PETITION FOR REVIEW OF A DECISION
v. OF THE WORKERS’ COMPENSATION BOARD
ACTION NO. WC-17-71184
JUSTIN THELE; DESIGNED ELECTRICAL
INTEGRATORS; METHODIST HOSPITAL;
MIDWEST SURGERY CENTERS, LLC;
ST. FRANCIS MEDICAL CENTER;
MIDWEST NEUROSURGEONS;
SOUTHEAST MISSOURI ANESTHESIA;
HONORABLE JOHN MCCRACKEN,
ADMINISTRATIVE LAW JUDGE; AND
WORKERS’ COMPENSATION BOARD APPELLEES
AND NO. 2021-CA-0418-WC
DESIGNED ELECTRICAL INTEGRATORS APPELLANT
PETITION FOR REVIEW OF A DECISION
v. OF THE WORKERS’ COMPENSATION BOARD
ACTION NO. WC-17-71184
JUSTIN THELE; KENTUCKY EMPLOYERS
MUTUAL INSURANCE;
MIDWEST SURGERY CENTERS, LLC;
ST. FRANCIS MEDICAL CENTER;
MIDWEST NEUROSURGEONS;
SOUTHEAST MISSOURI ANESTHESIA;
METHODIST HOSPITAL;
HONORABLE JOHN MCCRACKEN,
ADMINISTRATIVE LAW JUDGE; AND
WORKERS’ COMPENSATION BOARD APPELLEES
AND NO. 2021-CA-0508-WC
JUSTIN THELE CROSS-APPELLANT
CROSS-PETITION FOR REVIEW OF A DECISION
v. OF THE WORKERS’ COMPENSATION BOARD
ACTION NO. WC-17-71184
KENTUCKY EMPLOYERS MUTUAL
INSURANCE; DESIGNED ELECTRICAL
INTEGRATORS; MIDWEST SURGERY
CENTERS, LLC; ST. FRANCIS MEDICAL
CENTER; MIDWEST NEUROSURGEONS;
SOUTHEAST MISSOURI ANESTHESIA;
METHODIST HOSPITAL;
HONORABLE JOHN MCCRACKEN,
ADMINISTRATIVE LAW JUDGE; AND
WORKERS’ COMPENSATION BOARD CROSS-APPELLEES
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OPINION
VACATING AND REMANDING
** ** ** ** **
BEFORE: CETRULO, LAMBERT, AND TAYLOR, JUDGES.
TAYLOR, JUDGE: This consolidated matter involves three orders1 of an
Administrative Law Judge (ALJ) which, in sum, awarded appellee/cross-appellant,
Justin Thele, permanent partial disability and medical benefits from his former
employer (appellant/cross-appellee, Designed Electrical Integrators (DEI)) and his
former employer’s workers’ compensation carrier (appellant/cross-appellee
Kentucky Employers Mutual Insurance (KEMI)). The parties ask this Court to
review various aspects of a March 21, 2021, opinion of the Workers’
Compensation Board (Board) which, following its separate review on the merits,
affirmed the ALJ’s award in part, vacated in part, and remanded for purposes of
allowing the ALJ to resolve an issue that the ALJ had intentionally left unresolved
– namely, Thele’s outstanding claim against DEI and KEMI for sanctions.
As discussed below, we are unable to review the merits of this matter
because (1) the ALJ never resolved Thele’s outstanding claim for sanctions, which
rendered the ALJ’s orders at issue interlocutory; and (2) the administrative
1
At issue are the Administrative Law Judge’s: (1) March 21, 2019, interlocutory opinion and
award; (2) October 20, 2020, opinion, award, and order; and (3) November 4, 2020, order on
petition for reconsideration.
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procedure that could have otherwise authorized the Board to review this
interlocutory matter was never invoked. Accordingly, we vacate the Board’s
opinion and direct the Board to dismiss these appeals.
BACKGROUND
On August 10, 2017, Justin Thele was injured in the course and scope
of his employment with DEI; he was working on a platform attached to a scissor-
lift to access motors for an overhead conveyor system in a HomeGoods warehouse
in Brownsburg, Indiana, when a HomeGoods employee ran a forklift into the
scissor-lift and caused him to fall. On February 28, 2018, he initiated this workers’
compensation matter. And, over the course of the proceedings that followed,
several contested issues were identified and litigated between Thele, DEI, and
KEMI, including, among others: (1) jurisdiction under the Kentucky Workers’
Compensation Act (the Act); (2) the extent and duration of Thele’s work-related
injuries and disability; and (3) the extent of Thele’s entitlement to income and
medical benefits.
With that said, the ALJ resolved some of these issues shortly after
DEI and KEMI initiated a dispute regarding their obligation to pay several medical
expenses Thele claimed he had incurred for the treatment of his work injury –
expenses which, according to a December 12, 2018, filing of record, amounted to
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approximately $400,000;2 and which DEI and KEMI refused to pay solely because,
in their view, jurisdiction under the Act was lacking. Prompted by this dispute, the
ALJ entered a March 21, 2019, interlocutory order finding that jurisdiction under
the Act existed; Thele’s claimed medical expenses were related to his August 10,
2017, work injury and therefore compensable pursuant to Kentucky Revised
Statute (KRS) 342.020; and, that any additional medical expenses “reasonably
required for the cure and relief from the effects of his work related injuries” were
likewise compensable.
Over the two years of administrative proceedings that followed, Thele
asserted DEI and KEMI nevertheless largely refused without explanation to pay or
reimburse him for the approximately $400,000 in medical expenses the ALJ’s
March 21, 2019, order had deemed compensable. Accordingly, Thele claimed
sanctions were warranted, entitling him to an award representing his total amount
of attorney’s fees and costs. See KRS 342.310.3 And, at Thele’s behest,
2
To be exact, Thele submitted medical bills from Midwest Surgery Center, LLC ($38,585),
Southeast Missouri Anesthesia Services, LLC ($4,737), Midwest Neurosurgeons ($43,260), and
Indiana University Health ($337,480.76).
3
Thele has never identified the statutory basis of his request for sanctions, but “KRS [Kentucky
Revised Statute] 342.310 provides the only statutory basis to require an employer or insurance
carrier to pay the worker’s attorney’s fee from its own funds rather than the worker’s benefits.”
Rager v. Crawford & Co., 256 S.W.3d 4, 6 (Ky. 2008). In relevant part, KRS 342.310 provides:
(1) If any administrative law judge, the board, or any court before whom any
proceedings are brought under this chapter determines that such proceedings have
been brought, prosecuted, or defended without reasonable ground, he or it may
assess the whole cost of the proceedings which shall include actual expenses but
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“sanctions for Failure to pay medical bills previously ordered to be paid” was listed
as a contested issue in the ALJ’s final benefit review conference order and
memorandum of August 5, 2020.
Subsequently, the parties completed discovery and submitted briefs
outlining their respective positions, including their respective positions regarding
sanctions. And, in an October 4, 2020, Opinion, Award and Order, the ALJ
resolved most of the contested issues presented for adjudication. The relevant
substance of the order may be non-exhaustively summarized as follows:
• Thele’s claim, the ALJ reiterated, fell within the jurisdiction of the Act;
• Thele sustained a compensable Chance L1 fracture; fractured pelvis;
concussion; and injury to his left elbow, wrist, and hand on August 10, 2017,
in the course and scope of his work for DEI;
• Thele did not sustain an annular tear at L5/S1 due to the August 10, 2017,
work incident. Therefore, neither the annular tear, nor a February 28, 2019,
surgery Thele underwent to treat it, were compensable;
• Thele’s injuries due to the August 10, 2017, work incident warranted a 27%
impairment rating consistent with the American Medical Association’s
not be limited to the following: court costs, travel expenses, deposition costs,
physician expenses for attendance fees at depositions, attorney fees, and all other
out-of-pocket expenses upon the party who has so brought, prosecuted, or
defended them.
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Guidelines to the Evaluation of Permanent Impairment, 5th Edition (AMA
Guides); and
• Thele was not permanently totally disabled within the meaning of KRS
342.0011(11)(c), but he was entitled to have the “three” multiplier of KRS
342.730(1)(c)1. applied to his award of permanent partial disability benefits.
The ALJ also resolved issues pertaining to vocational rehabilitation;
subrogation credit; and approximately fifteen medical disputes that KEMI and DEI
had initiated between May 3, 2018, and April 17, 2020. However, the ALJ left the
contested issue of sanctions unresolved, stating in relevant part:
Defendants [DEI and KEMI] are order [sic], within 20
days of this order, to provide a statement of what medical
expenses and reimbursements were paid pursuant to the
March 21, 2019[,] Interlocutory Opinion. Defendants are
ordered to provide an explanation for any medical
expenses not paid that were reflected in Thele’s
December 12, 2018[,] filing. The ALJ reserves a ruling
on sanctions until after the Defendants’ complies [sic]
with this order.
Opinion, Award, and Order at 30.
For its part, DEI filed no response to the ALJ’s directive. KEMI, on
the other hand, filed a “compliance” statement on October 14, 2020, representing it
had paid for Thele’s “present and continued treatment in compliance with KRS
342.020” following the March 12, 2019, interlocutory order. But, noting it had
petitioned the ALJ to revisit whether Thele’s claim fell within the jurisdiction of
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the Act – and noting its intention to later file an appeal to the same effect – KEMI
denied responsibility for paying Thele’s “past unpaid medical expenses” (i.e., the
expenses Thele had identified in his December 12, 2018, filing) until the question
of jurisdiction was finally resolved by an appellate tribunal.
On November 4, 2020, the ALJ then entered an order denying
KEMI’s petition for reconsideration and resolving various other issues Thele had
raised in a separate petition. Importantly, the November 4, 2020, order also did not
address the issue of sanctions.
Subsequently, KEMI appealed to the Board and Thele cross-appealed.
But, Thele also moved the Board to “abate” or “remand” the appeals, arguing both
appeals stemmed from a decision of the ALJ that remained non-final due to the
unresolved issue of sanctions.
Without elaboration, the Board denied Thele’s motion. And, after
considering the arguments set forth in the parties’ respective briefs – including
Thele’s argument that the operative effect of 803 Kentucky Administrative
Regulation (KAR) 25:010 § 22 required the Board to dismiss both appeals – the
Board proceeded to review the ALJ’s decision on the merits. In an opinion entered
March 19, 2021, the Board affirmed with respect to the ALJ’s conclusions that (1)
Thele’s claim fell within the jurisdiction of the Act; (2) Thele was not permanently
totally disabled; and (3) Thele’s L5-S1 annular tear and related surgery were not
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compensable. It vacated the ALJ’s finding that Thele’s work-related injury
warranted a 27% impairment rating according to the AMA Guides and remanded
for additional findings, explaining that the ALJ’s rating had only accounted for
impairment to Thele’s lumbar spine, but had improperly failed to consider
impairment to his thoracic spine.
And, regarding Thele’s argument that the operative effect of 803 KAR
25:010 § 22 required the Board to dismiss both appeals, the Board held:
Thele argues the October 4, 2020[,] decision is
interlocutory in nature as it did not address the issue of
sanctions, and therefore, is not final and appealable.
Thele is correct that the ALJ did not address this issue in
his Opinion. We therefore remand for the ALJ to
determine whether sanctions are applicable.
March 19, 2021, Board’s Opinion at 30.
In other words, the Board acknowledged Thele’s argument, but
stopped short of substantively addressing it. These appeals followed.
STANDARD OF REVIEW
In the context of workers’ compensation
proceedings, the claimant has the burden of proof and the
risk of non-persuasion before the ALJ with regard to
every element of his claim. See Roark v. Alva Coal
Corporation, 371 S.W.2d 856 (Ky. 1963); Wolf Creek
Collieries v. Crum, 673 S.W.2d 735 (Ky. App. 1984);
Snawder v. Stice, 576 S.W.2d 276 (Ky. App. 1979).
KRS 342.285 designates the ALJ as the finder of fact in
workers’ compensation cases, and gives the ALJ the sole
discretion to determine the quality, character, and
substance of evidence. As fact-finder, an ALJ may reject
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any testimony and believe or disbelieve various parts of
the evidence, regardless of whether it comes from the
same witness or the same party’s total proof. Caudill v.
Maloney’s Discount Stores, 560 S.W.2d 15, 16 (Ky.
1977).
Thereafter, an appeal of the ALJ’s decision is
permitted, but KRS 342.285(2) and KRS 342.290
collectively prohibit the Board or subsequent reviewing
courts from considering new or additional evidence, or
substituting their judgment for that of the ALJ as to the
weight of evidence on questions of fact. The scope of
administrative and judicial review of an ALJ’s decision is
limited to determining whether the ALJ “acted without or
in excess of his powers;” whether the decision “was
procured by fraud;” or whether the decision was
erroneous as a matter of law. See KRS 342.285(2)(a)-(e)
and KRS 342.290. Legal errors would include whether
the ALJ misapplied Chapter 342 to the facts; made a
clearly erroneous finding of fact; rendered an arbitrary or
capricious decision; or committed an abuse of discretion.
Id.Ford Motor Co. (LAP) v. Curtsinger, 511 S.W.3d 922, 930 (Ky. App. 2017). With
respect to our review of an opinion of the Board, we only reverse when “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.” W. Baptist
Hosp. v. Kelly, 827 S.W.2d 685, 687-88 (Ky. 1992).
ANALYSIS
In Appeal No. 2021-CA-0414-WC, KEMI contests the Board’s
conclusion that the ALJ properly determined Thele’s injury fell within the
jurisdiction of the Act. In Appeal No. 2021-CA-0418-WC, DEI argues the Board
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exceeded its authority in remanding on the issue of impairment associated with
Thele’s L1 Chance fracture. In Cross-Appeal No. 2021-CA-0508-WC, Thele
contests the Board’s decision to affirm the ALJ’s conclusions that he was not
entitled to permanent total disability benefits, and that his L5-S1 surgery was non-
compensable.
As stated at the onset, however, the ALJ’s failure to address the
contested issue of sanctions is dispositive as it precluded the Board from
addressing the merits of this case. Regarding why, we begin with the premise that
the subject matter jurisdiction of administrative agencies, such as the Office of
Workers’ Claims and the Workers’ Compensation Board, extends only to those
matters that are expressly delegated by the legislature. See Custard Ins. Adjusters,
Inc. v. Aldridge, 57 S.W.3d 284, 287 (Ky. 2001). Thus, administrative appeals
brought by grant of a statute, as here, are subject to strict compliance with the
statute’s dictates, and appellate jurisdiction is not properly invoked unless the party
seeking to do so meets the conditions precedent to the appellate tribunal’s exercise
of jurisdiction. See Belsito v. U-Haul Co. of Kentucky, 313 S.W.3d 549, 551 (Ky.
2010). Here, KRS 342.285(1) defines the Board’s subject matter jurisdiction,
subjecting the Board’s review of an ALJ’s order to the administrative regulations
promulgated by the commissioner of the Department of Workers’ Claims. In turn,
the operative regulation, 803 KAR 25:010 § 22(2), provides in relevant part:
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(a) Within thirty (30) days of the date a final award,
order, or decision rendered by an administrative law
judge pursuant to KRS 342.275(2) is filed, any party
aggrieved by that award, order, or decision may file a
notice of appeal to the Workers’ Compensation Board.
(b) As used in this section, a final award, order, or
decision shall be determined in accordance with Civil
Rule 54.02(1) and (2).
(Emphasis added.)
Considering the administrative adoption of Kentucky Rules of Civil
Procedure (CR) 54.02, the Board’s subject matter jurisdiction relative to its
appellate authority is limited to reviewing awards, orders, or decisions that are
final within the meaning of that rule. Accordingly, it was the obligation of the
Board and remains the obligation of this Court – even in the absence of a motion
from the parties4 – to determine whether the ALJ’s orders in this matter qualified
as such.5 If they did not, the Board effectively assumed jurisdiction where it did
not exist. As such, we turn to CR 54.02, which provides in relevant part:
4
The parties note in their respective briefs before this Court that the issue of sanctions remains
unresolved, but Thele does not reassert his argument that the Workers’ Compensation Board
(Board) should have dismissed these appeals.
5
See, e.g., Basin Energy Co. v. Howard, 447 S.W.3d 179, 187 (Ky. App. 2014) (explaining in
relation to an appeal from the Board, “[a] reviewing body or court has an affirmative obligation
to ensure that it is acting within its subject-matter jurisdiction. Even if not raised by the parties, a
court must dismiss if it determines at any point in the litigation that it lacks subject-matter
jurisdiction. The parties cannot confer jurisdiction by failing to raise the issue either
intentionally or unintentionally.”); see also Wilson v. Russell, 162 S.W.3d 911, 913-14 (Ky.
2005) (internal quotation marks, brackets, and footnotes omitted) (explaining that while neither
the parties nor the Court of Appeals had identified as an issue the fact that the underlying
judgment was not final within the meaning of Kentucky Rules of Civil Procedure 54.02,
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(1) When more than one claim for relief is presented in
an action, whether as a claim, counterclaim, cross-claim,
or third-party claim, or when multiple parties are
involved, the court may grant a final judgment upon one
or more but less than all of the claims or parties only
upon a determination that there is no just reason for
delay. The judgment shall recite such determination and
shall recite that the judgment is final. In the absence of
such recital, any order or other form of decision, however
designated, which adjudicates less than all the claims or
the rights and liabilities of less than all the parties shall
not terminate the action as to any of the claims or parties,
and the order or other form of decision is interlocutory
and subject to revision at any time before the entry of
judgment adjudicating all the claims and the rights and
liabilities of all the parties.
(2) When the remaining claim or claims in a multiple
claim action are disposed of by judgment, that judgment
shall be deemed to readjudicate finally as of that date and
in the same terms all prior interlocutory orders and
judgments determining claims which are not specifically
disposed of in such final judgment.
To be clear, there is no dispute that Thele’s request for sanctions
against DEI and KEMI remains unresolved. Moreover, his request qualified as one
of the “claims,” “rights,” or “liabilities” that must be resolved before an award,
order, or decision may be deemed final and appealable absent the finality language
of CR 54.02(1). See, e.g., Hampton v. Intech Contracting, LLC, 581 S.W.3d 27,
“jurisdiction may not be waived, and it cannot be conferred by consent of the parties. This Court
must determine for itself whether it has jurisdiction. As there is no final order or judgment from
which to appeal, the Court of Appeals was without jurisdiction. And it has long been a
fundamental maxim that a court will not assume jurisdiction where it does not exist.”).
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32 (Ky. 2019) (explaining a circuit court’s order that failed to resolve a pending
claim for attorney’s fees and costs pursuant to KRS 342.310(1), and which failed
to include the finality language of CR 54.02(1) (i.e., that the judgment was final
and that there was no just reason for delay) remained interlocutory). Furthermore,
none of the orders at issue in these appeals recited the finality language of CR
54.02(1). Consequently, when the Board rendered its opinion of March 21, 2021,
it improperly addressed the merits of an interlocutory dispute and, thus,
“overlooked or misconstrued” the statute controlling its appellate jurisdiction.
Kelly, 827 S.W.2d at 687-88.
CONCLUSION
Considering the Board’s lack of jurisdiction, we accordingly vacate
the Board’s opinion. Upon remand, the Board is directed to dismiss the underlying
appeals in this matter.
ALL CONCUR.
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BRIEF FOR APPELLANT/CROSS- BRIEF FOR APPELLEE/CROSS-
APPELLEE, KENTUCKY APPELLANT, JUSTIN THELE:
EMPLOYERS MUTUAL
INSURANCE: Jeffery A. Roberts
Murray, Kentucky
Lyn Douglas Powers
Louisville, Kentucky
BRIEF FOR APPELLANT/CROSS-
APPELLEE, DESIGNED
ELECTRICAL INTEGRATORS:
R. Christion Hutson
Paducah, Kentucky
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