Printable Format44-532. Subrogation of insurer or group-funded pool to rights and duties of employer; methods of securing payment of compensation; failure to secure; penalties; notice to director by insurers; change of status notice by self-insurers and group-funded pool members; eligibility to self-insure; merging employers. (a) Where the payment of compensation of the employee or the employee's dependents is insured by a policy or policies, at the expense of the employer, or the employer is a member of a qualified group-funded workers compensation pool, the insurer or the qualified group-funded workers compensation pool shall be subrogated to the rights and duties under the workers compensation act of the employer so far as appropriate, including the immunities provided by K.S.A. 44-501, and amendments thereto.
(b) Every employer shall secure the payment of compensation to the employer's employees by insuring in one of the following ways: (1) By insuring and keeping insured the payment of such compensation with an insurance carrier authorized to transact the business of workers compensation insurance in the state of Kansas; (2) by showing to the director that the employer carries such employer's own risk and is what is known as a self-insurer and by furnishing proof to the director of the employer's financial ability to pay such compensation for the employer's self; (3) by maintaining a membership in a qualified group-funded workers compensation pool. The cost of carrying such insurance or risk shall be paid by the employer and not the employee.
(c) The knowing and intentional failure of an employer to secure the payment of workers compensation to the employer's employees as required in subsection (b) of this section is a class A misdemeanor.
(d) In addition, whenever the director has reason to believe that any employer has engaged or is engaging in the knowing and intentional failure to secure the payment of workers compensation to the employer's employees as required in subsection (b) of this section, the director shall issue and serve upon such employer a statement of the charges with respect thereto and shall conduct a hearing in accordance with the Kansas administrative procedure act, wherein the employer may be liable to the state for a civil penalty in an amount equal to twice the annual premium the employer would have paid had such employer been insured or $25,000, whichever amount is greater.
(e) The director shall not assess such a fine against a self-employed subcontractor for failure of the subcontractor to secure compensation for the subcontractor personally, however, the director shall enforce the provisions of this section for failure of the subcontractor to secure compensation for any other employee of the subcontractor as otherwise provided by law.
(f) Any civil penalty imposed or final action taken under this section shall be subject to review in accordance with the act for judicial review of agency actions in the district court of Shawnee county.
(g) All moneys received under this section for costs assessed or monetary penalties imposed shall be remitted to the state treasurer in accordance with the provisions of K.S.A. 75-4215, and amendments thereto. Upon receipt of each such remittance, the state treasurer shall deposit the entire amount in the state treasury to the credit of the workers compensation fund.
(h) (1) Every insurance carrier writing workers compensation insurance for any employment covered under the workers compensation act shall file, with the director or the director's designee, written notice of the issuance, nonrenewal or cancellation of a policy or contract of insurance, or any endorsement, providing workers compensation coverage, within 10 days after such issuance, nonrenewal or cancellation. Every such insurance carrier shall file, with the director, written notice of all such policies, contracts and endorsements in force on the effective date of this act.
(2) Every employer covered by the workers compensation act who is a qualified self-insurer shall give written notice to the director or the director's designee, if such employer changes from a self-insurer status to insuring through an insurance carrier or by maintaining a membership in a qualified group-funded workers compensation pool, such notice to be given within 10 days after the effective date of such change. Every self-insurer shall file with the director annually a report verifying the employer's continuing ability to pay compensation to the employer's employees.
(3) Every employer covered by the workers compensation act who is a member of a qualified group-funded workers compensation pool shall give written notice to the director or the director's designee, if such employer changes from a group-funded workers compensation pool to insuring through an insurance carrier or becoming a self-insurer, such notice to be given within 10 days after the effective date of such change.
(4) The mailing of any written notice or report required by this subsection (d) in a stamped envelope within the prescribed time shall comply with the requirements of this subsection.
(5) The director shall provide by regulation for the forms of written notices and reports required by this subsection (d).
(i) As used in this section, "qualified group-funded workers compensation pool" means any qualified group-funded workers compensation pool under K.S.A. 44-581 through 44-591, and amendments thereto, or any group-funded pool under the Kansas municipal group-funded pool act which includes workers compensation and employers' liability under the workers compensation act.
(j) A private firm shall not be eligible to apply to become a self-insurer unless it has been in continuous operation for at least five years or is purchasing an existing self-insured Kansas firm, plant or facility and the operation of the purchased firm, plant or facility: (1) Has been in continuous operation in Kansas for at least 10 years; (2) has generated an after-tax profit of at least $1,000,000 annually for the preceding three consecutive years; and (3) has a ratio of debt to equity of not greater than 3.5 to 1. As used in this subsection, "debt" means the sum of long-term borrowing maturing in excess of one year plus the current portion of long-term borrowing plus short-term financial institution borrowing plus commercial paper borrowing, and "equity" means the sum of the book value of stock plus paid-in capital plus retained earnings. The method for calculating the amount of security required of self-insureds shall be reviewed by an actuary every five years, beginning in fiscal year 1997. The costs for these actuarial studies shall be paid from the workers compensation fee fund.
(k) A corporation or other entity whose current identity is attributable to a merger or other transformation whereby the whole or a substantial part of a previous entity's assets and income have been transferred to it, and its liabilities have not increased beyond the financial review requirements of the director, which qualified under its previous identity as a self-insurer under other provisions of this statute, and amendments thereto, may apply for renewal as a self-insurer under its new name. The director may grant the application for renewal if satisfied that the new entity meets all necessary financial criteria for renewal that would have been applied to the previous self-insured entity. An application under these provisions shall be limited to an entity seeking renewal based upon the prior self-insured status of another entity or entities.
History: L. 1927, ch. 232, § 32; L. 1967, ch. 280, § 8; L. 1974, ch. 203, § 31; L. 1980, ch. 146, § 8; L. 1983, ch. 166, § 14; L. 1984, ch. 181, § 1; L. 1989, ch. 149, § 3; L. 1991, ch. 144, § 8; L. 1996, ch. 79, § 9; L. 1997, ch. 125, § 7; L. 1998, ch. 120, § 5; L. 2001, ch. 5, § 136; July 1.
Source or prior law:
L. 1911, ch. 218, § 34; R.S. 1923, 44-532.
Revisor's Note:
Section was amended twice in the 1996 session, see also 44-532b.
Law Review and Bar Journal References:
Actions by employer and insurance carrier as subrogees, G. Clay Baker, 8 J.B.A.K. 37 (1939).
County as self-insurer may create reserve fund, 7 K.L.R. 234 (1958)[quoting Sept. 17, 1958 opinion of attorney general].
Court's decision deeming certain employer to be "self-insurer," Thomas M. Van Cleave, Jr., 14 K.L.R. 393, 401 (1965).
Mentioned as encouraging insurance companies to conduct voluntary safety inspections, William F. Morrissey, 36 J.B.A.K. 173, 174 (1967).
"Potential Federalization of State Workmen's Compensation Law—The Kansas Response," James C. Wright and James P. Rankin, 15 W.L.J. 244, 264 (1976).
"Workmen's Compensation—An Introduction to Changes in the Kansas Statute," Bryce B. Moore, 24 K.L.R. 603, 605, 606 (1976).
"Workers' Compensation: Reconsidering the 'Right to Control' as the Exclusive Test for Employment Status," Catherine M. Foster, 23 W.L.J. 379, 388, 389 (1984).
"Workers Compensation: Apportionment of Attorney Fees in Third-Party Recoveries," Randall E. Fisher, XIV J.K.T.L.A. No. 3, 13 (1991).
"Legislative Changes Hurt Many Small, Family-Owned Businesses," Roger A. Riedmiller, J.K.T.L.A. Vol. XXI, No. 3, 13 (1998).
"New K.S.A. 44-503(g): Has the Immunity Windfall for Statutory Employers Been Curtailed?" Donald W. Vasos and Michael R. Wallace, J.K.T.L.A. Vol. 23, No. 6, 14 (2000).
Attorney General's Opinions:
Statutory basis for rules and regulations concerning prohibition of subrogation clauses by insurance commissioner. 84-35.
CASE ANNOTATIONS
Explanation, see Revisor's Note under article title, chapter 44, article 5.
Cases through 1973
IN GENERAL
—Self-insurance (1)
1. Employer not qualifying hereunder as "self-insurer" held to be "self-insurer" under K.S.A. 44-556; dissent. Scammahorn v. Gibraltar Savings & Loan Assn., 195 Kan. 220, 221, 222, 224, 225, 226, 404 P.2d 165 (1965).
INSURANCE COVERAGE
—Validity of policy (2-6)
2. Insurance carrier that is a party to a compensation action may have all its rights litigated and determined, including the question as to whether there was a valid outstanding policy. Employers' Liability Insurance Corp. v. Matlock, 151 Kan. 293, 297, 98 P.2d 456 (1940).
3. Employer fraudulently obtained antedated insurance policy; policy void; employee cannot recover thereon. Matlock v. Hollis, 153 Kan. 227, 233, 109 P.2d 119 (1941).
4. Insurance carrier has no right to bring independent action in district court against employer and employee to cancel or reform insurance policy after injury to the employee; district court lacks jurisdiction to hear such case. Employers' Liability Insurance Corp. v. Matlock, 151 Kan. 293, 297, 305 306, 98 P.2d 456 (1940).
5. Successive ten-day insurance binders construed with previous conduct and dealings; held to effect continuous insurance. McGhay v. Eaton, 146 Kan. 686, 690, 691, 73 P.2d 15 (1937).
6. Employer coming under compensation act after being insured; effect considered. Blanton v. Cotton Mills Co., 103 Kan. 118, 119, 172 P. 987 (1918).
—Miscellaneous matters (7-15)
7. Insurance company doctor denied recovery for medical services for the excess above the amount provided by act; charged with knowledge of act. Clopper v. Railways Ice Co., 136 Kan. 517, 518, 16 P.2d 512 (1932).
8. Policy held to cover injury occurring in work incidental to operations of lease of insured, although not at place specified in policy. Bass v. Lebow, 146 Kan. 487, 71 P.2d 1071 (1937).
9. City may act as own self-insurer. City of Wichita v. Wyman, 158 Kan. 709, 710, 150 P.2d 154 (1944).
10. Compensation award enforceable by execution against self-insurer. Lenon v. Standard Oil Co., 134 Kan. 289, 292, 5 P.2d 853 (1931).
11. Mentioned in approving adequacy of notice of hearing to carrier; construed with other sections. Landes v. Smith, 189 Kan. 229, 234, 368 P.2d 302 (1962).
12. Evidence of insurance contract proper to show employer under act. Evans v. Tibbetts, 134 Kan. 131, 134, 4 P.2d 399 (1931).
13. Reciprocal insurance contract held to obligate underwriters for injuries to employees. Scott v. Devine, 129 Kan. 808, 810, 284 P. 594 (1930).
14. Ambiguous provision in insurance policy given construction in harmony with act; liberal construction to protect workman, where reasonably possible. Mendel v. Fort Scott Hydraulic Cement Co., 147 Kan. 719, 731, 732, 78 P.2d 868 (1938).
15. Section mentioned; no provision for restitution or "recover back" of payments made pending appeal. Tompkins v. Rinner Construction Co., 196 Kan. 244, 248, 250, 409 P.2d 1001 (1966).
JURISDICTION OF ACTIONS
—Employee against carrier (16-17)
16. Employee must exhaust remedies under act before he can file an original action in the district court against an insurance carrier.
(a) Attebery v. Griffin Construction Co., 181 Kan. 450, 457, 312 P.2d 598 (1957);
(b) Dollar v. General Accident, Fire & Life Corp., 136 Kan. 368, 370, 15 P.2d 449 (1932);
(c) McGuire v. United States F. & G. Co., 134 Kan. 779, 8 P.2d 389 (1932);
(d) Murphy v. Continental Casualty Co., 134 Kan. 455, 7 P.2d 84 (1932).
17. Employee may bring action against employer's insurance carrier on liability insurance policy in district court. Samson v. United States Fidelity and Guaranty Co., 131 Kan. 59, 61, 289 P. 427 (1930); Gust v. Provident Life & Accident Ins. Co., 136 Kan. 88, 93, 12 P.2d 831 (1932).
—Matters not involving employee (19-25)
19. Courts' concern under compensation act pertains primarily to the liability of the employer to the workman and not to the settlement of independent controversies which may arise between the various insurance carriers. Justice v. Continental Can Co., 174 Kan. 539, 552, 257 P.2d 564 (1953); Attebery v. Griffin Construction Co., 181 Kan. 450, 461, 312 P.2d 598 (1957).
20. Director has no jurisdiction to determine rights and liabilities of an employer and an insurance agent or broker under a side arrangement, when such third party agent is not qualified to transact the business of compensation insurance in Kansas. King v. El Dorado Motor Co., 181 Kan. 477, 482, 311 P.2d 999 (1957).
21. If remedies under act are exhausted, an independent action may arise by one insurance carrier against another on matters incidentally arising out of contract. Attebery v. Griffin Construction Co., 181 Kan. 450, 460, 312 P.2d 598 (1957).
22. Employer's insurance carrier cannot draw in another respondent and carrier and litigate rights between carriers not relative to employee's claim. Attebery v. Griffin Construction Co., 181 Kan. 450, 460, 312 P.2d 598 (1957).
23. On compensation appeal district court cannot determine which of two insurers liable. Standard Surety & Cas. Co. v. Standard Acc. Ins. Co., 104 F.2d 492 (1939).
24. Director has no jurisdiction to enter award against unqualified insurance agent. King v. El Dorado Motor Co., 181 Kan. 477, 311 P.2d 999 (1957).
25. Insurer secondarily liable paying award may recover amount paid from insurer primarily liable; this action is properly independent of the compensation action, incidental thereto; proper parties discussed. United States Fidelity & Guaranty Co. v. Maryland Cas. Co., 186 Kan. 637, 646, 647, 352 P.2d 70 (1960).
—Subrogation (28-35)
28. Subrogation action brought pursuant to this section and K.S.A. 44-504. Employers' Mutual Casualty Co. v. Martin, 189 Kan. 498, 370 P.2d 110 (1962).
29. Action against third party by widow after 18 months; petition amended to include employer and insurance carrier; amendment related back; action not barred. Lady v. Ketchum, 186 Kan. 614, 622, 352 P.2d 21 (1960).
30. If workman fails to file action against third-party wrongdoer within one year, and employer likewise fails to bring it, the insurer may do so under his subrogation rights. Turner v. Benton, 183 Kan. 97, 100, 325 P.2d 349 (1958); Wise v. Morgan-Mack Motor Co., 173 Kan. 372, 377, 378, 246 P.2d 308 (1952).
31. If employee and employer fail to act, and insurance carrier has made compensation payments, then, the carrier can maintain an action in its name, or the name of the employer, as their interest may appear (see, also K.S.A. 44-504). Miller v. Broce-O'Dell Concrete Products, 182 Kan. 77, 80, 318 P.2d 1072 (1957).
32. There is no time under the act when a workman and employer (or a workman and insurer) may simultaneously maintain third-party tort actions; there is only one cause of action; distribution of the judgment does not make two judgments. Wise v. Morgan-Mack Motor Co., 173 Kan. 372, 378, 246 P.2d 308 (1952); Elam v. Bruenger, 165 Kan. 31, 35, 193 P.2d 225 (1948).
33. Subrogated insurance carrier cannot maintain third-party wrongdoer action against state when statute does not specifically authorize such a suit. American Mut. Liability Ins. Co. v. State Highway Comm., 146 Kan. 239, 240, 241, 243, 69 P.2d 1091 (1937).
34. Insurer has same right against third party as employee. Maryland Casualty Co. v. Ladd, 121 Kan. 659, 662, 249 P. 687 (1926).
35. Mentioned where employer's insurer filed action against lessor of land upon which workman was injured. Transport Insurance Co. v. Huston, 207 Kan. 759, 486 P.2d 1344 (1971).
Cases after 1973
36. Insurance coverage held persuasive as to whether particular employee covered under act; application of act established; common law action barred. Stonecipher v. Winn-Rau Corporation, 218 Kan. 617, 624, 545 P.2d 317.
37. Payment to workmen's compensation fund under K.S.A. 44-570 is not compensation, but funeral expenses under K.S.A. 44-510b(f) are compensation for which an insurer may be subrogated. Farm Bureau Mutual Ins. Co. v. Commercial Standard Ins. Co., 5 Kan. App. 2d 127, 612 P.2d 1265.
38. Carrier's subrogation rights did not extend to recovery of employee upon uninsured motorist policy, even though policy was paid for by employer. Knight v. Insurance Co. of North America, 647 F.2d 127, 128 (1981).
39. Cited; factors in determining whether business is agricultural pursuit adopted and applied; boarding and showing horses commercial enterprise. Witham v. Parris, 11 Kan. App. 2d 303, 304, 720 P.2d 1125 (1986).
40. Immunity of insurer in dual capacity as general liability insurer and workers' compensation carrier for alleged negligence in boiler inspection examined. Leroy v. Hartford Steam Boiler Inspec. and Ins. Co., 695 F. Supp. 1120, 1122 (D. Kan. 1988).
41. Liability of workers compensation fund (K.S.A. 44-567) to electing self-employed handicapped worker determined. Miller v. Miller, 13 Kan. App. 2d 262, 263, 768 P.2d 308 (1989).
42. Cited where disparate treatment between employees with nonresident alien dependents and others (K.S.A. 44-510b(i)) declared unconstitutional. Jurado v. Popejoy Constr. Co., 253 Kan. 116, 126, 853 P.2d 669 (1993).
43. Whether workers compensation board has authority to substitute its judgment for ALJ's decision in reviewing administrative decisions examined. Helms v. Tollie Freightways, Inc. 20 Kan. App. 2d 548, 550, 889 P.2d 1151 (1995).
44. City was not a necessary party to workers compensation carrier's action. Employers Mut. Cas. Co. v. Miner, 6 F. Supp. 2d 1232, 1235 (1998).
45. Employer exempted from workers compensation act who purchases workers compensation insurance is not deemed to have elected to be subject to act. Rivera v. Cimarron Dairy, 267 Kan. 875, 880, 988 P.2d 235 (1999).
46. Mentioned in holding that K.S.A. 44-510 does not permit award of expert witness fees. Higgins v. Abilene Machine, Inc., 38 Kan. App. 2d 735, 738, 172 P.3d 71 (2007).
47. Division of workers compensation has discretion to impose no civil penalty even after finding of violation of statute. Hills v. Kansas Dept. of Labor, 292 Kan. 17, 248 P.3d 1287 (2011).