The conscientious contractor seeks to prevent accidents on the construction site for a number of both economical and ethical reasons. Even when care is taken, accidents inevitably occur. By following a few basic precautions, the contractor can reduce the risk of accident and limits out-of-pocket workers' compensation liability.
The Kentucky General Assembly designed workers' compensation laws to encourage compliance with safety regulations. Specifically, KRS 342.165 penalizes an employer who fails to follow safety regulations by increasing the employer's workers' compensation liability to the injured employee by 30%. Workers' compensation insurance carriers routinely include a provision in their policies excluding coverage of this increased liability.
On October 29, 2009, the Kentucky Supreme Court reviewed the legality of that exclusion in KAGC v. Music Construction, Inc. The Court confronted the issue of whether the insurance carrier may sue an employer for reimbursement of increased benefits paid as a result of the 30% penalty. Music Construction had failed to follow safety regulations resulting in serious work-related injuries.
The Supreme Court ruled that the insurance carrier, KAGC, must initially pay the 30% increase in benefits despite the exclusion. However, the Court ruled that KAGC could sue Music Construction for reimbursement of increased benefits it had to pay.
Contractors should examine their compliance with safety regulations and carefully review their workers' compensation policies to determine whether this exclusion exists. Those two basic measures of risk management reduce the likelihood of accidents, eliminate the possibility of a penalty and promote understanding of an important part of liability coverage.
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