Kentucky Harlan Coal Co. v. Holmes

• Decision Date: 31 January 1994
• Docket Number: 93-SC-027-WC,Nos. 92-SC-1073-W,s. 92-SC-1073-W
• Citation: Kentucky Harlan Coal Co. v. Holmes, 872 S.W.2d 446 (Ky. 1994)
• Parties: KENTUCKY HARLAN COAL COMPANY, Appellant, v. Frank HOLMES; Special Fund; Ronald L. McDermott, Administrative Law Judge; and Workers' Compensation Board, Appellees, and COMMONWEALTH of Kentucky, DEPARTMENT OF MINES AND MINERALS, Appellant, v. Arthur MOORE; Larry Beale, Director of Special Fund; David Barber, Administrative Law Judge; and Workers' Compensation Board, Appellees.
• Court: Supreme Court of Kentucky

Page 446

872 S.W.2d 446

KENTUCKY HARLAN COAL COMPANY, Appellant, v. Frank HOLMES; Special Fund; Ronald L. McDermott,

Administrative Law Judge; and Workers'

Compensation Board, Appellees, and COMMONWEALTH of Kentucky, DEPARTMENT OF MINES AND MINERALS, Appellant, v. Arthur MOORE; Larry Beale, Director of Special Fund; David

Barber, Administrative Law Judge; and Workers'

Compensation Board, Appellees.

Nos. 92-SC-1073-WC, 93-SC-027-WC.

Supreme Court of Kentucky.

Jan. 31, 1994.

Rehearing Denied April 21, 1994.

Paul E. Jones, Baird, Baird, Baird & Jones, Pikeville, for appellant, Kentucky Harlan Coal Co.

Dennis Nagle, Cole, Cole, Anderson & Nagle, Barbourville, for appellee, Frank Holmes.

David Randall Allen, John E. Stephenson, Louisville, for Special Fund.

Ronald L. McDermott, Covington, Administrative Law Judge.

Thomas L. Ferreri, C. Patrick Fulton, Ferreri and Fogle, Louisville, for appellant, Comm. of Kentucky, Dept. of Mines and Minerals.

George C. Perry, III, John David Preston, Perry and Preston, Paintsville, for appellee, Arthur Moore.

Mark C. Webster, Louisville, for Special Fund.

David Allen Barber, Barber, Rowland & Paxton, Prestonsburg, Administrative Law Judge.

L.T. Grant, Com'r, Dept. of Workers' Claims, Valerie L. Salven, Workers' Compensation Bd., Frankfort, Workers' Compensation Bd.

REYNOLDS, Justice.

In two consolidated cases we address the issue of the constitutionality of KRS 342.732(1)(d) which declares:

If the administrative law judge finds that an employee has occupational pneumoconiosis with a radiographic classification of category 2/1, 2/2, 2/3, 3/2, 3/3, or progressive massive fibrosis, based on the latest 1LO International Classification of Radiographics, there shall be an irrebuttable presumption that the employee is totally disabled resulting from exposure to coal dust and the administrative law judge shall award income benefits equal to sixty-six and two-thirds percent (66 2/3%) of the employee's average weekly wage but not more than one hundred percent (100%) of the state average weekly wage and not less than twenty percent (20%) of the average weekly wage of the state as determined by KRS 342.740. Income benefits awarded under this paragraph shall be payable to the employee during such disability.

The statute essentially provides income benefits for occupational pneumoconiosis resulting from coal dust exposure, upon a finding that an employee has fixed/defined radiographic evidence of simple coal workers' pneumoconiosis. There shall be an irrebuttable presumption that the employee is totally disabled therefrom.

Kentucky Harlan Coal Company, Department of Mines and Minerals, and the Special Fund are arrayed against the constitutionality of the statute.

In the case of Commonwealth of Kentucky, Department of Mines and Minerals v. Arthur Moore, and Special Fund, et al., the basic facts are that Arthur Moore, an employee of the Department of Mines and Minerals, was determined by the Administrative Law Judge to have pneumoconiosis of 2/2 or above. The irrebuttable presumption provided by the statute was applied. No argument as to a determination of Moore's ability to perform some work was considered because of the irrebuttable presumption mandating total, permanent disability. Appellant's argument centers upon the statute.

In the case of Kentucky Harlan Coal Company v. Frank Holmes, and Special Fund, et al., the basic facts are not at issue. The employer raises issues additional to that of the constitutionality of the statute which are later addressed in this opinion.

It is contended that the statute is unconstitutional on four counts: (1) that it is special legislation contrary to Section 59(24) of the Kentucky Constitution; (2) that there is no rational basis/connection between the fact proved and the ultimate fact presumed; (3) that it is violative of due process rights; and (4) that the statute violates equal protection.

The constitutionality of KRS 342.732(1)(d) was upheld, in both cases, by the Court of Appeals. We affirm.

BACKGROUND

The social, economic and legislative history of the Act provides a basis for the statute's enactment in 1987 at an extraordinary session of the Kentucky legislature. In view of a rising concern that the cost of workmen's compensation and the increasing liability of the Special Fund would deter industrial development and encourage existing industries to depart the state, a task force of highly representative members conducted multiple meetings in 1986 and 1987. Studies by medical, economic, labor, management, actuarial and financial consultants culminated in a special legislative session.

Factors, including the following were determined:

1. Approximately 78% of the Special Fund's liability in the five years preceding July 1987, was attributable to the coal industry. More than 95% of the Special Fund's liability for occupational disease is attributable to coal workers' pneumoconiosis (black lung). Approximately 30% of the Special Fund's liability for traumatic injury is attributable to the coal industry. Finally, the failure to pre-fund and invest the sums necessary to meet Special Fund liabilities had produced an unpredictability and undue burden on all employers, as it was their annual assessments that were used to meet the Special Fund's liabilities.

2. Other facts before the legislature:

a. For the five years prior to 6/30/87, an average of over 700 occupational disease claims per year involved Special Fund liability due to coal workers' pneumoconiosis. During that period, the annual addition to the Special Fund's liability represented by new claims increased from $157,298,000 to $235,840,000. Edward H. O'Daniel, Jr., 1987 Kentucky Workers' Compensation Law, Foreward.

b. Before the 1987 Act, functional impairment played virtually no part in determining eligibility for pneumoconiosis benefits. Black lung benefits tended to be awarded on an all-or-nothing basis. Of 5,372 black lung awards made between 1/1/73 and 11/1/87, 90.5% were for total, occupational disability and only 9.5% were for permanent, partial, occupational disability. O'Daniel, supra, at 21.

c. Pursuant to x-ray examination, pneumoconiosis is classified as simple or complicated depending on the size of the opacities present in the patient's lungs. The presence of opacities smaller than one centimeter in diameter indicates the presence of simple pneumoconiosis; whereas, the presence of opacities larger than one centimeter in diameter indicates the presence of complicated pneumoconiosis. Simple pneumoconiosis is subclassified by the number of opacities present as category 1, 2, or 3, with category 2 representing x-rays with a moderate number of opacities and category 3 representing x-rays with more opacities than are typical of simple pneumoconiosis. Simple pneumoconiosis, even if category 3, is not usually associated with any significant decrease in lung function; whereas, complicated pneumoconiosis, particularly in its more advanced forms, is often associated with severe clinical disease and moderate to severe pulmonary dysfunction. O'Daniel, supra, at 13-15.

d. It was recommended by medical experts that pulmonary dysfunction be measured by spirometric testing, using the test which represented the best efforts of the patient. Medical testimony recommended that both x-rays (to determine the presence of the disease) and pulmonary function tests (to determine the severity of any respiratory impairment) be used to determine the level of benefits to be awarded. O'Daniel, supra, at 16.

e. X-ray studies by Drs. Anderson and Lane revealed that of Kentucky workers who filed for federal black lung benefits between 43-61% had the disease. From 42-59% of the cases were simple coal workers' pneumoconiosis, and from 1-2% were complicated coal workers' pneumoconiosis. A study conducted by the National Institute for Occupational Safety and Health (NIOSH) reported that 89% of coal miners with pneumoconiosis fall in 1LO category 1, the lowest category of simple pneumoconiosis. O'Daniel, supra, at 23.

f. It was projected that under KRS 342.732, the proposed legislation for black lung claims, awards would be distributed as follows:

64%--s 732(1)(a) RIB (category 1 simple, less than 20% impairment)

12%--s 732(1)(b) 75% (category 1 simple, 20-45% impairment)

4%--s 732(1)(c) 100% (category 1 simple, more than 45% impairment)

20%--s 732(1)(d) 100% (category 2 or 3 simple; complicated)

O'Daniel, supra, at 22.

Legislative Enactments--Relevant General Provisions:

1. KRS 342.1201--legislative findings and declarations regarding the negative economic impact of the coal industry on all of Kentucky industry via Special Fund assessments and declaration of the legislature's intent to impose more of the cost of workers' compensation that results from the coal industry on that industry.

2. KRS 342.122--was amended to provide for a combination of funding and prefunding and investment to meet the present and future liabilities of the Special Fund. In addition to the 23.3% Special Fund assessment imposed on the insurance or self-insurance premiums of all employers, the coal industry was assessed an additional 40%. (Under current law the basic assessment is 16.9% for all industries plus an additional 47% for the coal industry, for a total of 63.9%.)

3. KRS 342.1223, et seq.--were enacted to provide for a workers' compensation funding commission to control, invest, and manage the funds collected pursuant to KRS 342.122.

Legislative Enactments Regarding Occupational Disease:

1. Coal workers' pneumoconiosis

a. History--coal workers' pneumoconiosis was responsible for 95% of the Special Fund's occupational disease liability. Over 90% of awards were for total disability, but

medical evidence indicated that approximately 89% of workers with coal workers' pneumoconiosis had category 1 disease which, by itself, typically is not associated with significant pulmonary impairment.

b. KRS...