Denton v. Sunflower Elec. Co-op., Inc.

• Decision Date: 15 January 1988
• Docket Number: No. 59925,59925
• Citation: 242 Kan. 430,748 P.2d 420
• Parties: Ronald E. DENTON, Claimant, v. SUNFLOWER ELECTRIC COOPERATIVE, INC., Respondent/Appellee, and Home Indemnity Insurance Company, Insurance Carrier/Appellee, and Kansas Workers' Compensation Fund, Appellant.
• Court: Kansas Supreme Court

Page 420

748 P.2d 420

242 Kan. 430

Ronald E. DENTON, Claimant, v. SUNFLOWER ELECTRIC COOPERATIVE, INC., Respondent/Appellee and Home Indemnity Insurance Company, Insurance Carrier/Appellee and Kansas Workers' Compensation Fund, Appellant.

No. 59925.

Supreme Court of Kansas.

Jan. 15, 1988.

Syllabus by the Court

For an employer to be relieved of liability for payment of workers' compensation as authorized by K.S.A. 44-567 and as amended in 1987 (L.1987, ch. 189, § 3), it is not necessary that the employer prove it had a mental reservation when deciding to hire or retain a handicapped employee.

Hal D. Meltzer, of Turner and Boisseau, Chartered, Wichita, argued the cause, and Harry Bleeker, and Casey R. Law, of Turner and Boisseau, Chartered, Great Bend, were on briefs for appellees Sunflower Elec. Co-op. and Home Indem. Co.

Michael J. Unrein, of Davis, Wright, Unrein, Hummer & McCallister, Topeka, argued the cause, and Kerry M. Gasper, of the same firm, and Brock R. McPherson, of McPherson, Bauer, Pike & Pike, Chartered, Great Bend, were with him on briefs, for appellant Kansas Workers' Compensation Fund.

PRAGER, Chief Justice:

This is an appeal by the Kansas Workers' Compensation Fund (Fund) from a judgment of the district court affirming an award of workers' compensation and assessing the entire amount of the award against the Fund. The claimant is Ronald E. Denton. The employer is Sunflower Electric Cooperative, and its insurance carrier is Home Indemnity Company. Following the judgment of the district court, the Fund appealed to the Court of Appeals which affirmed the district court in Denton v. Sunflower Electric Co-op, 12 Kan.App.2d 262, 740 P.2d 98 (1987). The Supreme Court granted the Fund's petition for review.

The facts in the case, which are set out in detail in the Court of Appeals opinion, are essentially as follows: The claimant, Ronald E. Denton, was employed by Sunflower Electric Cooperative as a shift foreman. On May 21, 1983, claimant fell at work and injured his back. In August of that year, he underwent surgery for a ruptured disc. He returned to work in December 1983, and remained there until the plant shut down in August 1984. Denton applied for work at the Sunflower plant in Holcomb but was turned down because of his back problems. He then filed a workers' compensation claim, and Sunflower impleaded the Workers' Compensation Fund.

It was the position of the former employer, Sunflower Electric, that it had knowledge of Denton's preexisting back problem and that those problems contributed to his current disability. The evidence showed that from 1978 until the date of injury, Denton had missed at least 18 days of work due to his back. The Administrative Law Judge (ALJ) held in favor of Denton and then assessed the entire workers' compensation award against the Fund. On appeal, the director affirmed. The Fund then appealed to the district court which also affirmed. The Fund then appealed to the Court of Appeals which affirmed the district court.

This court granted the Fund's petition for review which raised a single issue: Whether the existence of a reservation in the mind of an employer in deciding whether to hire or retain a handicapped employee is an essential element of the burden of proof under K.S.A. 44-567(b). The Court of Appeals answered the question in the negative in a comprehensive opinion by the Honorable John E. Rees which sets forth the facts in detail, along with the applicable statutes and the court's rationale in concluding that a mental reservation of the employer is not a necessary element under the statute.

Judge Rees's well-written opinion analyzed the previous Kansas appellate cases on the issue and concluded that, for an employer to be relieved of liability for payment under K.S.A. 44-567, it is not necessary that the employer prove that it had a mental reservation when deciding to hire or retain the employee. The Court of Appeals opinion sets forth in great detail the evidence before the district court which established that Sunflower Electric had retained Denton as its employee after acquiring knowledge of Denton's preexisting back condition. It is not necessary to review the evidence of the employer's prior knowledge in view of the fact that the Fund did not petition for review on that issue.

The Court of Appeals then proceeded to determine the second issue on the appeal--whether a mental reservation is required in order for an employer to shift liability to the Kansas Workers' Compensation Fund. Judge Rees carefully analyzed the statutes and the Kansas cases and concluded that various statements made in cases where it was not necessary for the appellate disposition of the case were dicta. We agree with the analysis of the statutes and cases presented by Judge Rees and agree with the conclusion of the Court of Appeals that the existence of a "mental reservation" was not necessary in order for Sunflower Electric to shift to the Workers' Compensation Fund the liability for the compensation owed to Denton.

The controlling statute is K.S.A. 44-567, which was originally enacted in Laws of 1974, Chapter 203, Section 47. It provides:

"44-567. Same; relief from or apportionment of liability for subsequent injuries to handicapped workmen; proof of knowledge of impairment required; presumptions; commissioner of insurance to be impleaded. (a) An employer (1) who operates within the provisions of the workmen's compensation act (2) who knowingly employs or retains a handicapped employee, as defined in K.S.A. 44-566 and amendments thereto, shall be relieved of liability for compensation awarded or be entitled to an apportionment of the costs thereof as follows:

"(A) Whenever a handicapped employee is injured or is disabled or dies as a result of an injury and the director awards compensation therefor and finds that the injury, disability or the death resulting therefrom probably or most likely would not have occurred but for the preexisting physical or mental impairment of the handicapped employee, all compensation and benefits payable because of the injury, disability or death shall be paid from the workers' compensation fund.

"(B) Subject to the provisions of the workmen's compensation act, whenever a handicapped employee is injured or is disabled or dies as a result of an injury and the director finds that the injury probably or most likely would have been sustained or suffered without regard to the employee's preexisting physical or mental impairment but the resulting disability or death was contributed to by the preexisting impairment, the director shall determine in a manner which is equitable and reasonable and based upon medical evidence the amount of disability and proportion of the cost of award which is attributable to the employee's preexisting physical or mental impairment, and the amount so found shall be paid from the workers' compensation fund.

"(b) In order to be relieved of liability under this section, the employer must prove either that the employer had knowledge of the preexisting impairment at the time the employer employed the handicapped employee or that the employer retained the handicapped employee in employment after acquiring such knowledge. The employer's knowledge of the preexisting impairment may be established by any evidence sufficient to maintain the employer's burden of proof with regard thereto. If the employer, prior to the occurrence of a subsequent injury to a handicapped employee, files with the director a notice of the employment or retention of such employee, together with a description of the handicap claimed, such notice and description of handicap shall create a presumption that the employer had knowledge of the preexisting impairment.

"(c) Knowledge of the employee's preexisting impairment or handicap at the time the employer employs or retains the employee in employment shall be presumed conclusively if the employee, in connection with an application for employment or an employment medical examination or otherwise...