Workers Compensation: KRAHWINKEL V. COMMONWEALTH ALUMINUM (SCOKY; 2/23/2006)

WORKERS COMPENSATION – Independent Contractor; Double Recovery

DATE: 2/21/2006

SC reversed the Court of Appeals insofar as it vacated Appellant’s judgment in its entirety, and remanded this case to the circuit court with directions to determine an appropriate computation of the total credit due to the defendant Commonwealth in light of the employer’s/insurer’s failure to assert its right of subrogation and enter an amended judgment in accordance with that computation .

EMPLOYEES OF INDEPENDENT CONTRACTOR.  The owner Commonwealth was not held vicariously liable because of the negligence of Intech’s employees (subcontractor). It was held directly liable because of its own negligence.    There is no reason why appellant, simply because he was an employee of an independent contractor, should be placed in a better position than if he had been an employee the owner, in which case his recovery would be limited without question to the benefits provided by the Workmen’s Compensation Act.  Conversely, there is no valid reason why the owner should be subjected to more liability simply because it engaged the services of a qualified independent contractor.  The liability of the owner for the negligence of the independent contractor does not extend to the employees of the independent contractor.

An owner is liable for injuries sustained by an employee of its independent contractor that were caused by the owner’s own negligence. The trial court properly held Commonwealth liable for damages incurred by Appellant because of Commonwealth’s own negligence .

DOUBLE RECOVERY.  The statute separately defines the respective rights of the injured employee and the employer/insurer when the employee’s injuries were caused by the negligence of a third party. The employer/insurer "owns" a subrogation right to the amount of compensation it paid to the injured employee, and the employee "owns" the right to any other damages for which the third-party tortfeasor is legally liable.   The emphasized language in the statute clearly precludes double recovery by the employee and does not condition that preclusion upon whether the employer actually pursues its subrogation rights (or foregoes those rights or does not intervene to recover those rights).  In his separate opinion, the Chief Justice would hold that when the employer or  carrier entitled to subrogation under KRS 342.700(1) decides not to pursue its subrogation rights, the common law collateral source rule and/or KRS 411 .188(2) assigns those rights to the worker as a matter of law.

However, neither KRS 342.700(1) nor KRS 411 .188(2) so provides. Both statutes provide only that the failure of the subrogee to assert its rights results in the loss of those rights. Neither provides that those rights are thereby transferred to the subrogor in order to permit double recovery.

Comment:  Obtain an assignment of the workers compensation subrogation rights of recovery and do not rely upon simply an agreement by the insurer to ‘forego’ or not to prosecute.  Otherwise, the defendant/employer obtains a credit.

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