RELATES TO: KRS 342.320

STATUTORY AUTHORITY: KRS 342.260

NECESSITY, FUNCTION, AND CONFORMITY: KRS 342.260 requires the Workers' Compensation Board to prepare such rules and administrative regulations as it considers necessary to carry on its work and for carrying out the provisions of KRS Chapter 342. KRS 342.320 requires the Workers' Compensation Board to approve the payment of the attorney's fee in any case involving benefits under KRS Chapter 342 and to commute the final payments of benefits payable under the award to a lump sum for that purpose. KRS Chapter 342.120 provides the method by which an employer or its insurance carrier and the Special Fund share liability for awards for injuries occurring and disabilities arising on or after July 15, 1982. The function of this administrative regulation is to establish a mechanism for crediting the above referenced parties for the payment of attorneys' fees in these cases.

Section 1. Credit for Lump Sum Payment of Charges by Attorneys. A party defendant shall be entitled, without further order of the board, to credit for the lump sum value of any attorney's fee paid. The procedure for payment of attorney fees and the impact of such payment on weekly benefits shall be as follows:

(1) The Labor Cabinet, Department of Workers' Claims, Division of the Special Fund, shall calculate the credit for attorney's fee as follows:

(a) Number of weeks as awarded due in future (do not include payments payable prior to attorney fee award) = X weeks.

(b) Obtain a lump sum of X (X weeks on lump sum table) = Z weeks.

(c) Divide amount of attorney fee by amount due per week = Z weeks.

(d) Y weeks minus Z weeks = Z weeks.

(e) Look in table on lump sum and find A weeks in the Present Work column of the chart and then take the figure in the weeks column of the chart = B weeks, the total number of weeks of actual remaining award payments by parties defendant before the credit causes cessation of award payment checks.

(f) X minus B = C weeks, the number of weeks of benefit cessation required to equal the statutory credit.

(2) The Labor Cabinet, Department of Workers' Claims, Division of the Special Fund, shall calculate the employer's credit for attorney's fee as follows:

(a) Number of weeks due from employer or insurance carrier in future pursuant to KRS 342.120 (do not include payments payable prior to attorney fee award) = X₁.

(b) Obtain a lump sum of X₁ (X₁ weeks on lump sum table = Y₁ weeks.

(c) Divide amount of attorney fee by amount due per week = Z weeks.

(d) Multiply Z weeks by employer's percentage of award = Z₁ weeks.

(e) Y₁ weeks minus Z₁ weeks = A₁ weeks.

(f) Look in table on lump sum and find A₁ weeks in the Present Worth column of the chart and then take the figure in the weeks column of the chart = B₁ weeks, the number of weeks yet to be paid by the employer or the insurance carrier before the Special Fund begins to pay disability benefits.

(3) The calculations set forth in subsections (1) and (2) of this section shall be completed by the Division of the Special Fund and the results forwarded to the other payers, as well as the plaintiff. Any disagreements as to the application of the formula shall be resolved by the board upon motion by any party. Special Fund's notice shall include the following information:

(a) Attorney fee to be paid by each party. The period of time for which each party defendant will be responsible for disability benefit payment and, in cases involving lifetime benefits, the date upon which benefits payments will be reinstituted by the Special Fund after taking credit for the amount advanced to pay the attorney's fee in a lump sum.

(4) When the defendant payor or payers has fulfilled its obligations as reduced pursuant to subsection (2) of this section, payments will commence by the Special Fund (there will be no stoppage to recover advance attorney fee payments at this time). The Special Fund shall continue weekly benefit payments until such time as the number of weeks remaining in the specified benefit period or the life expectancy as determined by mortality tables approved by the Workers' Compensation Board, multiplied by the weekly benefit rate is equal to the total attorney fee and discount paid by all payers on behalf of the injured worker. In claims where benefits are payable for a lifetime, the weekly benefit payments will be reinstituted by the Special Fund at such time as the payor surpasses the life expectancy as determined by the mortality table approved by the Workers' Compensation Board and shall continue until terminated by death or order of the Workers' Compensation Board.

(5) No part of this section should be viewed as a limitation on the party's right to negotiate a settlement subject to statutory approval by the Workers' Compensation Board. (10 Ky.R. 509; eff. 11-2-83.)