Metzinger v. Kentucky Retirement Systems, No. 2007-SC-000363-DG.

Decision Date27 August 2009
Docket NumberNo. 2007-SC-000363-DG.
Citation299 S.W.3d 541
PartiesMitchell METZINGER, Appellant, v. KENTUCKY RETIREMENT SYSTEMS, et al., Appellees.
CourtUnited States State Supreme Court — District of Kentucky
Opinion of the Court by Justice SCOTT.

This is an appeal from a Court of Appeals' opinion affirming the decision of the Kentucky Retirement Systems, both of which are based on the underlying premise that KRS 61.607 allows the agency to consider annuity payments received as a result of a global settlement of workers' compensation and civil claims in calculating maximum disability retirement benefits. Because such an interpretation of KRS 61.607 exceeds the plain statutory language, we reverse the decision of the Court of Appeals and remand this matter to the Kentucky Retirement Systems for further proceedings consistent with this opinion.


On May 31, 1998, while working as an electrician for the City of Louisville, Appellant, Mitchell Metzinger, was electrocuted by an energized conductor and suffered severe burns to his left hand and right arm such that he was disabled for life. Appellant subsequently applied for disability retirement benefits and filed both a workers' compensation action against his employer, the City of Louisville ("the City"), as well as a civil tort action against Louisville Gas & Electric Company ("LG & E") and Bill's Electric, both of whom were responsible for constructing and maintaining the light and pole that electrocuted him. Pursuant to KRS 342.700, the City subsequently filed an intervening complaint in the civil case against LG & E, Bill's Electric, and Appellant, seeking indemnification for sums of money it had already expended or expected to expend as a result of Appellant's work-related injury.

In May of 2001, Appellant was awarded permanent and total disability benefits (as well as medical expenses) in his workers' compensation claim against the City. Total payments due Appellant amounted to approximately $788,630.70 and were to be made at a rate of $1,860.00 per month, beginning in October 2001 and lasting until December of 2035. The City, however, never made payments pursuant to this monthly award.1

In December of 2001, Appellant, LG & E, Bill's Electric, and the City entered into a global settlement and release resolving not only Appellant's pending tort claim and workers' compensation award but also all of the indemnification claims asserted by the parties against one another. There, LG & E and Bill's Electric accepted primary responsibility for Appellant's injuries and they agreed to pay Appellant a lump-sum settlement totaling $549,649.00.2 Significantly, the agreement also provided that Appellant be provided a monthly payment in the form of an annuity. The annuity was purchased for $435, 713.00 with LG & E contributing $282,038.50 (approximately 65%) toward the price and the City paying the remainder, $153,674.50 (approximately 35%).

According to the terms of the settlement, the annuity was to pay Appellant $1,800.00 per month from January 1, 2002 to December 31, 2004. At that point, monthly payments were to increase to $1,915.80 per month and were to be paid until Appellant's death or for the next seventeen years, whichever was longer. In exchange for contributing to the purchase of the annuity, LG & E agreed to release the City from any claims of contribution or indemnification arising out of Appellant's injury and the City, likewise, released LG & E and Bill's Electric from any further claims of indemnification (totaling $882,809.51). In consideration for the City's agreement, Appellant was required to pay it $25,000 out of his settlement proceeds.

In exchange for the City's contribution to the purchase of the annuity, Appellant agreed to release the City from its monthly payment obligation under his prior workers' compensation award (though retaining rights to medical benefits).3 The Department of Workers Claims subsequently approved the settlement agreement, thereby extinguishing his future rights to the award. The "compromise settlement" of the workers' compensation award reiterated that Appellant "understands and accepts $153,674.50 as sufficient consideration for a buy-out and waiver of the City's obligation under the [workers' compensation] Opinion and Award." Under the agreement, the City waived a lien, in total, of $704,139.01.

After the settlement, in May of 2002, the Kentucky Retirement Systems approved Appellant's application for disability retirement benefits. However, approximately nine (9) months later, the agency sent Appellant a letter informing him that a calculation of his disability allowance showed that his combined monthly benefit exceeded the maximum statutory amount. In particular, the Kentucky Retirement Systems found that Appellant had been overpaid $27,142.20 and requested repayment in that amount. In addition, the agency determined that Appellant's gross monthly allowance had to be lowered from $1,655.42 to $827.70 in order to conform to KRS 61.607(2).4 The letter, though, did not specify how these figures were arrived at.

Suspecting that the agency had considered all of his annuity payments in its calculation, Appellant contested the agency's determination and requested an administrative hearing. There, Appellant claimed that he had not received any workers' compensation payments to justify such a reduction in his monthly disability benefits.5 At the conclusion of the administrative hearing, however, the Hearing Officer upheld the agency's initial determination.6 In her order, the Hearing Officer found that Appellant's global settlement effectively "substituted his workers' compensation benefits for an annuity," and, relying upon Rue v. Kentucky Retirement Sys., 32 S.W.3d 87 (Ky.App.2000), held that the annuity payments represented a "monthly benefit, if any, from workers' compensation" pursuant to KRS 61.607(1). Therefore, the Hearing Officer concluded, the Kentucky Retirement Systems was entitled to consider Appellant's monthly annuity payments in calculating his maximum disability benefits.

The Appellant filed exceptions to the Hearing Officer's order but the Board of Trustees adopted her recommendation and issued a "Final Order and Notice of Appeal Rights." The Franklin Circuit Court, on appeal, upheld the decision of Kentucky Retirement Systems and the Court of Appeals affirmed its ruling. We granted Appellant's Motion for Discretionary Review.

On appeal, Appellant argues that the agency's interpretation was erroneous on two grounds. First, Appellant contends that the Kentucky Retirement Systems improperly considered his annuity payments as workers' compensation benefits when it reduced his disability retirement benefits. Secondly, and in any event, Appellant argues that it was arbitrary and capricious for the Kentucky Retirement Systems to consider the entire amount of his annuity payments in its calculation. The Kentucky Retirement Systems, on the other hand, does not dispute the fact that they considered Appellant's annuity payments in calculating his maximum monthly benefits. Rather, the agency argues that KRS 61.607 permitted it to take into account any payments that were voluntarily exchanged for a right to payment under an outstanding workers' compensation award.

Issue Presented

We address the issue we consider central to the proper resolution of this case: whether the Kentucky Retirement Systems' interpretation of KRS 61.607 is consistent with the plain language of the statute. We hold that it is not. Accordingly, we do not reach the parties' remaining dispute as to how the agency was to calculate and apportion the annuity.

1. KRS 61.607

KRS 61.607 establishes an individual's maximum disability benefits under the law. Subsection (2) of the statute defines maximum disability benefits as a "combined monthly benefit" that "exceeds one hundred percent (100%) of the disabled employee's final rate of pay or his final compensation, whichever is greater." If the sum of one's combined monthly benefit exceeds this defined maximum benefit, KRS 61.607 empowers the Kentucky Retirement Systems to reduce the disability retirement allowance "to an amount which would cause his projected combined monthly benefit to equal one hundred percent (100%) of his final rate of pay or his final compensation, whichever is greater."

KRS 61.607 also sets forth a formula that the Kentucky Retirement Systems must use in calculating one's maximum disability benefits. Subsection (1) directs the agency to "[a]dd the monthly benefit payable to the disabled employee from the retirement system ... to his monthly benefit, if any, from Social Security ... and his monthly benefit, if any, from workers' compensation ... to arrive at a projected combined monthly benefit." The statute, therefore, considers two other forms of monthly payment (in addition to disability benefits) in formulating a combined monthly benefit for purposes of a maximum monthly benefit calculation: social security and workers' compensation. It is the agency's interpretation of the latter that is at issue here.

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