Could Red Fox Coal workers claim Kentucky's utility rebate fund for unpaid workers' compensation?

Plain-English summary

In 1996, Kentucky's Attorney General concluded that Red Fox Coal workers whose compensation claims had gone unpaid could claim benefits from the SERF fund if they had properly elected to do so. The commissioner administering that fund had asked whether Red Fox claimants qualified under KRS 393.080 as amended by HB 287.

The opinion tied Red Fox's unpaid claims to the same self-insurance group that had covered South East Coal Company. It said South East Coal's default depleted the group's assets, stopping payments on two Red Fox claims as well. The AG found a reasonable relationship between those claims and the utility refund that supplied the SERF fund.

Currency note

This opinion was issued in 1996. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Historical summary

Red Fox Coal claimants

The AG said Red Fox workers' compensation claimants who had properly elected were entitled to claim SERF benefits. It identified two Red Fox employees who had been awarded benefits from the Miners' Self Insurance Group before the group stopped paying.

SERF fund administrator

The opinion applied KRS 393.080 as amended by HB 287 to the administrator's question. It relied on the relationship between Red Fox and South East Coal through their shared self-insurance group, and on the effect of South East Coal's default on that group's ability to pay claims.

Self-insurance group

The AG described Red Fox and South East Coal as members of the same group between 1986 and 1993. It said the group's funds ran out and that no member assets remained to assess for additional premiums. Those facts supported its conclusion about the unpaid Red Fox claims.

Common questions

Were Red Fox Coal workers included in the SERF fund opinion?

Yes. The AG concluded that Red Fox workers' compensation claimants who had properly elected could claim benefits from the fund.

Why did the AG connect Red Fox claims to a South East Coal utility refund?

The companies had belonged to the same miners' self-insurance group. The opinion said South East Coal's default drained the group, leaving it unable to pay Red Fox claimants, while the South East Coal lawsuit produced the utility rebate fund.

Did the opinion cover every Red Fox employee automatically?

It addressed workers' compensation claimants who had properly elected to claim SERF benefits. It did not say that employment alone qualified someone for payment.

Background and statutory framework

The commissioner of the Department of Workers' Claims asked about Red Fox claimants under KRS 393.080 as amended by HB 287. The AG referred to OAG 96-7's discussion of a reasonable relationship between the source of a refund and unpaid compensation claims. It also identified OAG 96-20 in the source's list of earlier opinions, without describing a separate holding from it here. The opinion concluded that properly electing Red Fox claimants could claim SERF benefits.

Citations and references

• KRS 393.080 as amended by HB 287: the provision the AG applied to the SERF fund.
• OAG 96-7: earlier analysis of the relationship between the refund and unpaid claims.

Source

• Landing page: https://kdla.access.preservica.com/uncategorized/IO_f2919274-de50-4648-878f-7fc95dc778b0/
• Original PDF: https://kdla.access.preservica.com/download/file/IO_f2919274-de50-4648-878f-7fc95dc778b0

Original opinion text

OAG 96-36
September 11, 1996
Subject:

Red Fox Coal and HB 287 as enacted

Requested by:

Walter W. Turner, Commissioner
Department of Workers’ Claims

Written by:

Michael A. Richardson

Syllabus:

Worker’s compensation claimants working for Red Fox Coal Company are also entitled to claim benefits from the SERF Fund created from the pool of unclaimed utility rebates ordered following the Kentucky Utility Co. vs. South East Coal Company case.

Statutes construed:
OAGs cited:

KRS 393.080 as amended by HB 287

OAG 96-7 and OAG 96-20

Opinion of the Attorney General
We are asked by the Commissioner of the Department of Workers’ Claims, acting as the Administrator of the SERF Fund created pursuant to HB 287, whether the workers’ compensation claimants working for Red Fox Coal Company would also qualify for benefits from that fund. THE FACTS Red Fox Coal Company was a member of Miners’ Self Insurance Group (MSIG) along with South East Coal Company (SECC) be-

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tween 1986 and 19931. In 1993 there were two claimants who had been awarded benefits from MSIG who were employees of Red Fox Coal. When MSIG ceased payment of workers’ compensation benefits to the SECC claimants, it also ceased payment on these two claims. The reason for ceasing payments was the fact that MSIG ran out of money, and there were no assets of the members of MSIG to assess for additional premiums. ANALYSIS In OAG 96-7 we discussed the “reasonable relationship between the source of, and reason for, the refund” in regard to South East Coal Company. Red Fox Coal Company was closely tied to SECC in many ways, most specifically through MSIG. One of the factors considered in OAG 96-7 was the impact that losing the law suit had on SECC, and its ability to fulfill its commitments to MSIG. These same findings apply to Red Fox as a member of MSIG. That is to say, the default of SECC drained MSIG of its assets, and thereby resulted in the default of Red Fox to its workers. Red Fox Coal Company merged with DLX, Inc. in 1993, and that merged company declared bankruptcy in 1994. Thus Red Fox is also a “bankrupt employer who purportedly was self-insured, either individually or through a self-insurance group, under KRS Chapter 342.” The fact that SECC lost the $35,000,000.00 law suit with Kentucky Utilities Company both created the utility rebate fund in question and left MSIG without the assets to pay the claims for SECC and Red Fox employees. Thus it seems clear that employees of Red Fox Coal Company are in basically the same position as the employees of SECC. CONCLUSION There is a reasonable relationship between the source of, and reason for, the refund held by Kentucky Utility Company and the un1The only other member of Miners’ Self Insurance Group was South East Ohio Coal Company, a wholly owned subsidiary of South East Coal Company.

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paid workers’ compensation liability of Red Fox Coal Company, within the meaning of KRS 393.080 as amended by HB 287. The workers’ compensation claimants of Red Fox Coal Company who have properly elected to do so are entitled to claim benefits from the SERF Fund. Albert B. Chandler III Attorney General

Michael A. Richardson
Assistant Attorney General