Insurance – Workers Compensation coverage issue: Kentucky Associated General Contractors Self-Insurance Fund (KAGC) v. Music Construction, Inc. (SC 10/29/2009)

Kentucky Associated General Contractors Self-Insurance Fund (KAGC) v. Music Construction, Inc.
2008-SC-000795-DG October 29, 2009
Opinion of the Court. All sitting; all concur.

Employee suffered permanent and total disability from a trench collapse. KOSHA subsequently cited the employer for intentional safety violations. Because of these violations, employee sought and received a 30% enhancement to his disability award, as allowed under KRS 342.165(1). KAGC, the employer’s workers’ compensation insurance carrier (the Appellant), sued the employer for reimbursement of the amount of the increase in benefits, citing a specific exclusion in the contract of insurance. The trial court dismissed the suit for failure to state a claim. The Court of Appeals affirmed the dismissal, holding that under AIG/AIU v. South Akers Mining, the claim was barred. The Supreme Court reversed, noting that AIG/AIU did not apply since it was a workers’ compensation case involving a statutory requirement that carriers promptly pay all benefits. By contrast, the Court held this case was centered on a contract dispute where the injured worker has no stake or interest in the outcome. The Court remanded the case back to the circuit court.

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