Ch. 125             1997 Session Laws of Kansas             601

An Act relating to the workers compensation act; amending K.S.A. 44-505, 44-510b, 44-
523, 44-534, 44-536, 44-550b, 44-557a, 44-567, 44-5,120, 44-5,121 and 74-713 and
K.S.A. 1996 Supp. 44-508, 44-510, 44-532, 44-534a, 44-551, 44-555c, 44-566a and 44-
5,125 and repealing the existing sections; also repealing K.S.A. 1996 Supp. 44-532b.

Be it enacted by the Legislature of the State of Kansas:

Section 1. K.S.A. 1996 Supp. 12-2621 is hereby amended to read as
follows: 12-2621. (a) With respect to the categories of coverage described
in subparagraphs (d)(1) through (4) of K.S.A. 12-2618, and amendments
thereto, premium contributions to the pool shall be based upon appro-
priate manual classification and rates, plus or minus applicable experience
credits or debits, and minus any advance discount approved by the trus-
tees, not to exceed 25% of manual premium. The pool shall use rules,
classifications and rates as promulgated by the national council on com-
pensation insurance an approved rating organization for workers com-
pensation if the pool has been in operation for less than five years. Such
rates shall either be the rates effective June 1, 1994, or the prospective
loss costs, as defined in K.S.A. 40-1113c, and amendments thereto, plus
expenses necessary to administer the pool. For purposes of subsection
(b), the prospective loss costs shall be presumed to be the 70% required
to be deposited in the claims fund. If the pool has been in operation for
more than five years, the board of trustees may determine such rates and
discounts as approved by the commissioner. Premium contributions to
the pool for all other lines of insurance shall be based on rates filed by a
licensed rating organization or on rates of certain companies filing rates
with the commissioner and approved by the commissioner for the pool.
In lieu of the foregoing, the board of trustees may determine such clas-
sification, rates and discounts as approved by the commissioner.

Premium contributions to any pool providing life insurance or any pool
providing group sickness and accident insurance as described in K.S.A.
12-2617, and amendments thereto, shall be based on sound actuarial prin-
ciples.

(b) An amount equal to at least 70% of the annual premium shall be
maintained in a designated depository for the purpose of paying claims

602             1997 Session Laws of Kansas             Ch. 125

in a claims fund account. The remaining annual premium shall be placed
into a designated depository for the payment of taxes, fees and adminis-
trative and other operational costs in an administrative fund account.

(c) Any moneys for a fund year in excess of the amount necessary to
fulfill all obligations of the pool for that fund year, including any obligation
to retain adequate surplus funds, as defined by subsection (h) of K.S.A.
12-2618, and amendments thereto, in lieu of specific and aggregate excess
insurance, may be declared to be refundable by the trustees not less than
12 months after the end of the fund year. Any such refund shall be paid
only to those members who remained participants in the pool for an entire
year. Payment of previously earned refunds shall not be contingent on
continued membership in the pool.

Sec. 2. K.S.A. 44-505 is hereby amended to read as follows: 44-505.
(a) Subject to the provisions of K.S.A. 44-506 and amendments thereto,
the workers compensation act shall apply to all employments wherein
employers employ employees within this state except that such act shall
not apply to:

(1) Agricultural pursuits and employments incident thereto, other
than those employments in which the employer is the state, or any de-
partment, agency or authority of the state;

(2) any employment, other than those employments in which the em-
ployer is the state, or any department, agency or authority of the state,
wherein the employer had a total gross annual payroll for the preceding
calendar year of not more than $20,000 for all employees and wherein
the employer reasonably estimates that such employer will not have a
total gross annual payroll for the current calendar year of more than
$20,000 for all employees, except that no wages paid to an employee who
is a member of the employer's family by marriage or consanguinity shall
be included as part of the total gross annual payroll of such employer for
purposes of this subsection, except where the employer is a self-employed
subcontractor under circumstances wherein K.S.A. 44-503, and amend-
ments thereto, would otherwise apply;

(3) any employment, other than those employments in which the em-
ployer is the state, or any department, agency or authority of the state,
wherein the employer has not had a payroll for a calendar year and
wherein the employer reasonably estimates that such employer will not
have a total gross annual payroll for the current calendar year of more
than $20,000 for all employees, except that no wages paid to an employee
who is a member of the employer's family by marriage or consanguinity
shall be included as a part of the total gross annual payroll of such em-
ployer for purposes of this subsection;

(4) the employment of any firefighters who are members of a fire-
men's relief association for whom a valid statement of election to except
such members from the provisions of the workers compensation act has

Ch. 125             1997 Session Laws of Kansas             603

been filed with the director by the governing body of such firemen's relief
association as provided in K.S.A. 44-505d and amendments thereto; or

(5) services performed by a qualified real estate agent as an inde-
pendent contractor. For the purposes of this act a qualified real estate
agent shall be deemed to be an independent contractor if such qualified
real estate agent is licensed by the Kansas real estate commission as a
salesperson under the real estate brokers' and salespersons' license act
and for whom: (A) Substantially all of the remuneration, whether or not
paid in cash, for the services performed by such individual as a real estate
salesperson is directly related to sales or other output, including the per-
formance of services, rather than to the number of hours worked; and
(B) the services performed by the individual are performed pursuant to
a written contract between such individual and the person for whom the
services are performed and such contract provides that the individual will
not be treated as an employee with respect to such services for state tax
purposes.

(b) Each employer who employs employees in employments which
are excepted from the provisions of the workers compensation act as
provided in subsection (a) of this section, shall be entitled to come within
the provisions of such act by: (1) Becoming a member in and by main-
taining a membership in a qualified group-funded workers' compensation
pool, as provided by K.S.A. 44-581 to 44-591, inclusive, and amendments
thereto; or (2) filing with the director a written statement of election to
accept thereunder. Such written statement of election shall be effective
from the date of filing until such time as the employer files a written
statement withdrawing such election with the director. All written state-
ments of election or of withdrawal of election filed pursuant to this sub-
section shall be in such form as may be required by the director by rules
and regulations.

(c) This act shall not apply in any case where the accident occurred
prior to the effective date of this act. All rights which accrued by reason
of any such accident shall be governed by the laws in effect at that time.

Sec. 3. K.S.A. 1996 Supp. 44-508 is hereby amended to read as fol-
lows: 44-508. As used in the workers compensation act:

(a) ``Employer'' includes: (1) Any person or body of persons, corpo-
rate or unincorporate, and the legal representative of a deceased em-
ployer or the receiver or trustee of a person, corporation, association or
partnership; (2) the state or any department, agency or authority of the
state, any city, county, school district or other political subdivision or
municipality or public corporation and any instrumentality thereof; and
(3) for the purposes of community service work, the entity for which the
community service work is being performed and the governmental agency
which assigned the community service work, if any, if either such entity
or such governmental agency has filed a written statement of election

604             1997 Session Laws of Kansas             Ch. 125

with the director to accept the provisions under the workers compensa-
tion act for persons performing community service work and in such case
such entity and such governmental agency shall be deemed to be the joint
employer of the person performing the community service work and both
shall have the rights, liabilities and immunities provided under the work-
ers compensation act for an employer with regard to the community serv-
ice work, except that the liability for providing benefits shall be imposed
only on the party which filed such election with the director, or on both
if both parties have filed such election with the director; for purposes of
community service work, ``governmental agency'' shall not include any
court or any officer or employee thereof and any case where there is
deemed to be a ``joint employer'' shall not be construed to be a case of
dual or multiple employment.

(b) ``Workman'' or ``employee'' or ``worker'' means any person who
has entered into the employment of or works under any contract of serv-
ice or apprenticeship with an employer. Such terms shall include but not
be limited to: Executive officers of corporations; professional athletes;
persons serving on a volunteer basis as duly authorized law enforcement
officers, ambulance attendants, mobile intensive care technicians, fire-
fighters, but only to the extent and during such periods as they are so
serving in such capacities; persons employed by educational, religious and
charitable organizations, but only to the extent and during the periods
that they are paid wages by such organizations; persons in the service of
the state, or any department, agency or authority of the state, any city,
school district, or other political subdivision or municipality or public
corporation and any instrumentality thereof, under any contract of serv-
ice, express or implied, and every official or officer thereof, whether
elected or appointed, while performing official duties; persons in the serv-
ice of the state as volunteer members of the Kansas department of civil
air patrol, but only to the extent and during such periods as they are
officially engaged in the performance of functions specified in K.S.A.
48-3302 and amendments thereto; volunteers in any employment, if the
employer has filed an election to extend coverage to such volunteers;
minors, whether such minors are legally or illegally employed; and per-
sons performing community service work, but only to the extent and dur-
ing such periods as they are performing community service work and if
an election has been filed an election to extend coverage to such persons.
Any reference to an employee who has been injured shall, where the
employee is dead, include a reference to the employee's dependents, to
the employee's legal representatives, or, if the employee is a minor or an
incapacitated person, to the employee's guardian or conservator. Unless
there is a valid election in effect which has been filed as provided in K.S.A.
44-542a and amendments thereto, such terms shall not include individual
employers, limited or general partners or self-employed persons, except
a self-employed subcontractor performing work for a contractor.

Ch. 125             1997 Session Laws of Kansas             605

(c) (1) ``Dependents'' means such members of the employee's family
as were wholly or in part dependent upon the employee at the time of
the accident.

(2) ``Members of a family'' means only surviving legal spouse and
children; or if no surviving legal spouse or children, then parents or grand-
parents; or if no parents or grandparents, then grandchildren; or if no
grandchildren, then brothers and sisters. In the meaning of this section,
parents include stepparents, children include stepchildren, grandchildren
include stepgrandchildren, brothers and sisters include stepbrothers and
stepsisters, and children and parents include that relation by legal adop-
tion. In the meaning of this section, a surviving spouse shall not be re-
garded as a dependent of a deceased employee or as a member of the
family, if the surviving spouse shall have for more than six months willfully
or voluntarily deserted or abandoned the employee prior to the date of
the employee's death.

(3) ``Wholly dependent child or children'' means:

(A) A birth child or adopted child of the employee except such a child
whose relationship to the employee has been severed by adoption;

(B) a stepchild of the employee who lives in the employee's house-
hold;

(C) any other child who is actually dependent in whole or in part on
the employee and who is related to the employee by marriage or consan-
guinity; or

(D) any child as defined in subsections (3)(A), (3)(B) or (3)(C) who
is less than 23 years of age and who is not physically or mentally capable
of earning wages in any type of substantial and gainful employment or
who is a full-time student attending an accredited institution of higher
education or vocational education.

(d) ``Accident'' means an undesigned, sudden and unexpected event
or events, usually of an afflictive or unfortunate nature and often, but not
necessarily, accompanied by a manifestation of force. The elements of an
accident, as stated herein, are not to be construed in a strict and literal
sense, but in a manner designed to effectuate the purpose of the workers
compensation act that the employer bear the expense of accidental injury
to a worker caused by the employment.

(e) ``Personal injury'' and ``injury'' mean any lesion or change in the
physical structure of the body, causing damage or harm thereto, so that
it gives way under the stress of the worker's usual labor. It is not essential
that such lesion or change be of such character as to present external or
visible signs of its existence. An injury shall not be deemed to have been
directly caused by the employment where it is shown that the employee
suffers disability as a result of the natural aging process or by the normal
activities of day-to-day living.

(f) The words ``arising out of and in the course of employment'' as
used in the workers compensation act shall not be construed to include

606             1997 Session Laws of Kansas             Ch. 125

injuries to the employee occurring while the employee is on the way to
assume the duties of employment or after leaving such duties, the prox-
imate cause of which injury is not the employer's negligence. An em-
ployee shall not be construed as being on the way to assume the duties
of employment or having left such duties at a time when the worker is
on the premises of the employer or on the only available route to or from
work which is a route involving a special risk or hazard and which is a
route not used by the public except in dealings with the employer. An
employee shall not be construed as being on the way to assume the duties
of employment, if the employee is a provider of emergency services re-
sponding to an emergency.

The words, ``arising out of and in the course of employment'' as used
in the workers compensation act shall not be construed to include injuries
to employees while engaged in recreational or social events under cir-
cumstances where the employee was under no duty to attend and where
the injury did not result from the performance of tasks related to the
employee's normal job duties or as specifically instructed to be performed
by the employer.

(g) ``Burden of proof'' means the burden of a party to persuade the
trier of facts by a preponderance of the credible evidence that such party's
position on an issue is more probably true than not true on the basis of
the whole record.

(h) ``Director'' means the director of workers compensation as pro-
vided for in K.S.A. 75-5708 and amendments thereto.

(i) ``Health care provider'' means any person licensed, by the proper
licensing authority of this state, another state or the District of Columbia,
to practice medicine and surgery, osteopathy, chiropractic, dentistry, op-
tometry, podiatry or psychology.

(j) ``Secretary'' means the secretary of human resources.

(k) ``Construction design professional'' means any person who is an
architect, professional engineer, landscape architect or land surveyor who
has been issued a license by the state board of technical professions to
practice such technical profession in Kansas or any corporation organized
to render professional services through the practice of one or more of
such technical professions in Kansas under the professional corporation
law of Kansas or any corporation issued a certificate of authorization un-
der K.S.A. 74-7036 and amendments thereto to practice one or more of
such technical professions in Kansas.

(l) ``Community service work'' means: (1) Public or community serv-
ice performed as a result of a contract of diversion or of assignment to a
community corrections program or conservation camp or suspension of
sentence or as a condition of probation or in lieu of a fine imposed by
court order; or (2) public or community service or other work performed
as a requirement for receipt of any kind of public assistance in accordance

Ch. 125             1997 Session Laws of Kansas             607

with any program administered by the secretary of social and rehabilita-
tion services.

(m) ``Utilization review'' means the initial evaluation of appropriate-
ness in terms of both the level and the quality of health care and health
services provided a patient, based on accepted standards of the health
care profession involved. Such evaluation is accomplished by means of a
system which identifies the utilization of health care services above the
usual range of utilization for such services, which is based on accepted
standards of the health care profession involved, and which refers in-
stances of possible inappropriate utilization to the director for referral to
a peer review committee.

(n) ``Peer review'' means an evaluation by a peer review committee
of the appropriateness, quality and cost of health care and health services
provided a patient, which is based on accepted standards of the health
care profession involved and which is conducted in conjunction with util-
ization review.

(o) ``Peer review committee'' means a committee composed of health
care providers licensed to practice the same health care profession as the
health care provider who rendered the health care services being re-
viewed.

(p) ``Group-funded self-insurance plan'' includes each group-funded
workers compensation pool, which is authorized to operate in this state
under K.S.A. 44-581 through 44-592 and amendments thereto, each mu-
nicipal group-funded pool under the Kansas municipal group-funded pool
act which is covering liabilities under the workers compensation act, and
any other similar group-funded or pooled plan or arrangement that pro-
vides coverage for employer liabilities under the workers compensation
act and is authorized by law.

(q) On and after the effective date of this act, ``workers compensation
board'' or ``board'' means the workers compensation board established
under K.S.A. 1996 Supp. 44-555c and amendments thereto.

Sec. 4. K.S.A. 1996 Supp. 44-510 is hereby amended to read as fol-
lows: 44-510. Except as otherwise provided therein, medical compensa-
tion under the workers compensation act shall be as follows:

(a) It shall be the duty of the employer to provide the services of a
health care provider, and such medical, surgical and hospital treatment,
including nursing, medicines, medical and surgical supplies, ambulance,
crutches, and apparatus, and transportation to and from the home of the
injured employee to a place outside the community in which such em-
ployee resides, and within such community if the director in the director's
discretion so orders, including transportation expenses computed in ac-
cordance with subsection (a) of K.S.A. 44-515 and amendments thereto,
as may be reasonably necessary to cure and relieve the employee from
the effects of the injury.

608             1997 Session Laws of Kansas             Ch. 125

(1) The director shall appoint, subject to the approval of the secretary,
a specialist in health services delivery, who shall be referred to as the
medical administrator. The medical administrator shall be a person li-
censed to practice medicine and surgery in this state and shall be in the
unclassified service under the Kansas civil service act. The medical ad-
ministrator, subject to the direction of the director, shall have the duty
of overseeing the providing of health care services to employees in ac-
cordance with the provisions of the workers compensation act, including
but not limited to:

(A) Preparing, with the assistance of the advisory panel, the fee
schedule for health care services as set forth in this section;

(B) developing, with the assistance of the advisory panel, the utili-
zation review program for health care services as set forth in this section;

(C) developing procedures for appeals and review of disputed
charges or services rendered by health care providers under this section;

(D) developing a system for collecting and analyzing data on expend-
itures for health care services by each type of provider under the workers
compensation act; and

(E) carrying out such other duties as may be delegated or directed
by the director or secretary.

(2) The director shall prepare and adopt rules and regulations, which
shall be in effect on or before July 1, 1993, and which establish a schedule
of maximum fees for medical, surgical, hospital, dental, nursing, voca-
tional rehabilitation or any other treatment or services provided or or-
dered by health care providers and rendered to employees under the
workers compensation act. The schedule shall include provisions and re-
view procedures for exceptional cases involving extraordinary medical
procedures or circumstances and shall include costs and charges for med-
ical records and testimony.

(3) The schedule of maximum fees shall be reasonable, shall promote
health care cost containment and efficiency with respect to the workers
compensation health care delivery system, and shall be sufficient to en-
sure availability of such reasonably necessary treatment, care and at-
tendance to each injured employee to cure and relieve the employee from
the effects of the injury.

(4) (A) In every case, all fees, transportation costs, charges under this
section and all costs and charges for medical records and testimony shall
be subject to approval by the director and shall be limited to such as are
fair, reasonable and necessary. The schedule of maximum fees shall be
reviewed annually revised as necessary at least every two years by the
director to assure that the schedule is current, reasonable and fair.

(B) There is hereby created an advisory panel to assist the director
in establishing a schedule of maximum fees as required by this section.
The panel shall consist of the commissioner of insurance and seven mem-
bers appointed as follows: (i) One person shall be appointed by the Kansas

Ch. 125             1997 Session Laws of Kansas             609

medical society, (ii) one member shall be appointed by the Kansas asso-
ciation of osteopathic medicine, (iii) one member shall be appointed by
the Kansas hospital association, (iv) one member shall be appointed by
the Kansas chiropractic association, and (v) three members appointed by
the secretary. One member appointed by the secretary shall be a repre-
sentative of employers recommended to the secretary by the Kansas
chamber of commerce and industry. One member appointed by the sec-
retary shall be a representative of employees recommended to the sec-
retary by the Kansas AFL-CIO. One member appointed by the secretary
shall be a representative of entities providing vocational rehabilitation
services pursuant to K.S.A. 44-510g and amendments thereto. Each ap-
pointed member shall be appointed for a term of office of two years which
shall commence on July 1 of the year of appointment.

(C) All fees and other charges paid for such treatment, care and at-
tendance, including treatment, care and attendance provided by any
health care provider, hospital or other entity providing health care serv-
ices, shall not exceed the amounts prescribed by the schedule of maxi-
mum fees established under this section or the amounts authorized pur-
suant to the provisions and review procedures prescribed by the schedule
for exceptional cases. A health care provider, hospital or other entity pro-
viding health care services shall be paid either such health care provider,
hospital or other entity's usual charge for the treatment, care and at-
tendance or the maximum fees as set forth in the schedule, whichever is
less. In reviewing and approving the schedule of maximum fees, the di-
rector shall consider the following:

(i) The levels of fees for similar treatment, care and attendance im-
posed by other health care programs or third-party payors in the locality
in which such treatment or services are rendered;

(ii) the impact upon cost to employers for providing a level of fees
for treatment, care and attendance which will ensure the availability of
treatment, care and attendance required for injured employees;

(iii) the potential change in workers compensation insurance premi-
ums or costs attributable to the level of treatment, care and attendance
provided; and

(iv) the financial impact of the schedule of maximum fees upon health
care providers and health care facilities and its effect upon their ability
to make available to employees such reasonably necessary treatment, care
and attendance to each injured employee to cure and relieve the em-
ployee from the effects of the injury.

(D) Members of the advisory panel attending meetings of the advi-
sory panel, or attending a subcommittee of the advisory panel authorized
by the advisory panel, shall be paid subsistence allowances, mileage and
other expenses as provided in K.S.A. 75-3223 and amendments thereto.

(5) Any contract or any billing or charge which any health care pro-
vider, vocational rehabilitation service provider, hospital, person, or in-

610             1997 Session Laws of Kansas             Ch. 125

stitution enters into with or makes to any patient for services rendered in
connection with injuries covered by the workers compensation act or the
fee schedule adopted under this section, which is or may be in excess of
or not in accordance with such act or fee schedule, is unlawful, void and
unenforceable as a debt.

(6) The director shall have jurisdiction to hear and determine all dis-
putes as to such charges and interest due thereon and shall prescribe
procedural rules to be followed by the parties to such disputes. In the
event of any controversy arising under this section, payments shall not be
delayed for any amounts not in dispute or controversy. Acceptance by
any provider of services of a payment amount under this section which is
less than the full amount charged for the services, shall not affect the
right to have a review of the claim for the outstanding or remaining
amounts. In the event of a dispute as to such charges, the health care
provider, hospital, institution, person or other provider under this section
may appear and be represented in the action under the workers com-
pensation act.

(7) If the director finds, after utilization review and peer review, that
a provider or facility has made excessive charges or provided or ordered
unjustified treatment, services, hospitalization or visits, the provider or
facility shall not receive payment pursuant to this section from an insur-
ance carrier, employer or employee for the excessive fees or unjustified
treatment, services, hospitalization or visits and such provider or facility
shall repay any fees or charges collected therefor.

(8) Not later than December 31, 1993, the director shall develop and
implement, or contract with a qualified entity to develop and implement,
utilization review and peer review procedures relating to the services
rendered by providers and facilities, which services are paid for in whole
or in part pursuant to the workers compensation act. The director may
contract with one or more private foundations or organizations to provide
utilization review, as appropriate, of entities providing health care services
or vocational rehabilitation services, or both, pursuant to the workers
compensation act.

(9) By accepting payment pursuant to this section for treatment or
services rendered to an injured employee, a health care provider or health
care facility shall be deemed to consent to submitting all necessary records
to substantiate the nature and necessity of the service or charge and other
information concerning such treatment to utilization review and peer re-
view under this section. Such health care provider shall comply with any
decision of the director pursuant to subsection (a)(10).

(10) If it is determined by a peer review committee that a provider
improperly overutilized or otherwise rendered or ordered unjustified
treatment or services or that the fees for such treatment or services were
excessive, the director may order the provider to show cause why the
provider should not be required to repay the amount which was paid for

Ch. 125             1997 Session Laws of Kansas             611

rendering or ordering such treatment or services and shall provide the
provider a hearing thereon if requested. If a hearing is not requested
within 30 days of receipt of the order and the director decides to proceed
with the matter, a hearing shall be conducted and if a prima facie case is
established a final order shall be issued by the director. If the final order
is adverse to a health care provider, the director shall provide a report to
the licensing board of the health care provider with full documentation
of any such determination, except that no such report shall be provided
until after judicial review if the order is appealed. Any order of the di-
rector under this section shall be subject to review by the board.

(11) Except as provided by K.S.A. 60-437 and amendments thereto
or this section, all reports, information, statements, memoranda, pro-
ceedings, findings and records which relate to utilization review or peer
review conducted pursuant to this section, including any records of peer
review committees, shall be privileged and shall not be subject to discov-
ery, subpoena, or other means of legal compulsion for release to any
person or entity and shall not be admissible in evidence in any judicial or
administrative proceeding, except those proceedings authorized pursuant
to this section.

(12) A provider or facility may not improperly charge or overcharge
a workers compensation insurer or charge for services which were not
provided, for the purpose of obtaining additional payment.

(13) Any violation of the provisions of this section which is willful or
which demonstrates a pattern of improperly charging or overcharging
workers compensation insurers constitutes grounds for the director to
impose a civil fine not to exceed $5,000. Any civil fine imposed under
this section shall be subject to review in accordance with the act for
judicial review and civil enforcement of agency actions in the district court
for Shawnee county. All moneys received for civil fines imposed under
this section shall be deposited in the state treasury to the credit of the
workers compensation fund.

(14) As used in this subsection (a), unless the context or the specific
provisions require otherwise, ``provider'' means any health care provider
or vocational rehabilitation service provider, and ``facility'' means any fa-
cility providing health care services or vocational rehabilitation services,
or both, including any hospital.

(b) Any health care provider, nurse, physical therapist, any entity pro-
viding medical, physical or vocational rehabilitation services or providing
reeducation or training pursuant to K.S.A. 44-510g and amendments
thereto, medical supply establishment, surgical supply establishment, am-
bulance service or hospital who accept the terms of the workers compen-
sation act by providing services or material thereunder shall be bound by
the fees approved by the director and no injured employee or dependent
of a deceased employee shall be liable for any charges above the amounts
approved by the director. If the employer has knowledge of the injury

612             1997 Session Laws of Kansas             Ch. 125

and refuses or neglects to reasonably provide the services of a health care
provider required by this section, the employee may provide the same
for such employee, and the employer shall be liable for such expenses
subject to the regulations adopted by the director. No action shall be filed
in any court by a health care provider or other provider of services under
this section for the payment of an amount for medical services or materials
provided under the workers compensation act and no other action to
obtain or attempt to obtain or collect such payment shall be taken by a
health care provider or other provider of services under this section, in-
cluding employing any collection service, until after final adjudication of
any claim for compensation for which an application for hearing is filed
with the director under K.S.A. 44-534 and amendments thereto. In the
case of any such action filed in a court prior to the date an application is
filed under K.S.A. 44-534 and amendments thereto, no judgment may be
entered in any such cause and the action shall be stayed until after the
final adjudication of the claim. In the case of an action stayed hereunder,
any award of compensation shall require any amounts payable for medical
services or materials to be paid directly to the provider thereof plus an
amount of interest at the rate provided by statute for judgments. No
period of time under any statute of limitation, which applies to a cause
of action barred under this subsection, shall commence or continue to
run until final adjudication of the claim under the workers compensation
act.

(c) (1) If the director finds, upon application of an injured employee,
that the services of the health care provider furnished as provided in
subsection (a) and rendered on behalf of the injured employee are not
satisfactory, the director may authorize the appointment of some other
health care provider. In any such case, the employer shall submit the
names of three health care providers that are not associated in practice
together. The injured employee may select one from the list who shall
be the authorized treating health care provider. If the injured employee
is unable to obtain satisfactory services from any of the health care pro-
viders submitted by the employer under this subsection (c)(1), either
party or both parties may request the director to select a treating health
care provider.

(2) Without application or approval, an employee may consult a
health care provider of the employee's choice for the purpose of exami-
nation, diagnosis or treatment, but the employer shall only be liable for
the fees and charges of such health care provider up to a total amount of
$500. The amount allowed for such examination, diagnosis or treatment
shall not be used to obtain a functional impairment rating. Any medical
opinion obtained in violation of this prohibition shall not be admissible
in any claim proceedings under the workers compensation act.

(d) An injured employee whose injury or disability has been estab-
lished under the workers compensation act may rely, if done in good faith,

Ch. 125             1997 Session Laws of Kansas             613

solely or partially on treatment by prayer or spiritual means in accordance
with the tenets of practice of a church or religious denomination without
suffering a loss of benefits subject to the following conditions:

(1) The employer or the employer's insurance carrier agrees thereto
in writing either before or after the injury;

(2) the employee submits to all physical examinations required by the
workers compensation act;

(3) the cost of such treatment shall be paid by the employee unless
the employer or insurance carrier agrees to make such payment;

(4) the injured employee shall be entitled only to benefits that would
reasonably have been expected had such employee undergone medical
or surgical treatment; and

(5) the employer or insurance carrier that made an agreement under
paragraph (1) or (3) of this subsection may withdraw from the agreement
on 10 days' written notice.

(e) In any employment to which the workers compensation act ap-
plies, the employer shall be liable to each employee who is employed as
a duly authorized law enforcement officer, ambulance attendant, mobile
intensive care technician or firefighter, including any person who is serv-
ing on a volunteer basis in such capacity, for all reasonable and necessary
preventive medical care and treatment for hepatitis to which such em-
ployee is exposed under circumstances arising out of and in the course
of employment.

(f) No person shall be subject to civil liability for libel, slander or any
other relevant tort cause of action by virtue of performing utilization
review or peer review under contract with the director pursuant to sub-
section (a)(7).

Sec. 5. K.S.A. 44-510b is hereby amended to read as follows: 44-
510b. Where death results from injury, compensation shall be paid as
provided in K.S.A. 44-510 and amendments thereto, and as follows:

(a) If an employee leaves any dependents wholly dependent upon the
employee's earnings at the time of the accident, all compensation benefits
under this section shall be paid to such dependent persons. Such de-
pendents shall be paid weekly compensation, except as otherwise pro-
vided in this section, in a total sum to all such dependents, equal to 662/3%
of the average gross weekly wage of the employee at the time of the
accident, computed as provided in K.S.A. 44-511 and amendments
thereto, but in no event shall such weekly benefits exceed, nor be less
than, the maximum and minimum weekly benefits provided in K.S.A. 44-
510c and amendments thereto, subject to the following:

(1) If the employee leaves a surviving legal spouse or a wholly de-
pendent child or children, or both, who are eligible for benefits under
this section, then all death benefits shall be paid to such surviving spouse

614             1997 Session Laws of Kansas             Ch. 125

or children, or both, and no benefits shall be paid to any other wholly or
partially dependent persons.

(2) A surviving legal spouse shall be paid compensation benefits for
life or until remarriage, except as otherwise provided in this section.

(3) Any wholly dependent child of the employee shall be paid com-
pensation, except as otherwise provided in this section, until such de-
pendent child becomes 18 years of age, except that any such dependent
child who is not physically or mentally capable of earning wages in any
type of substantial and gainful employment, or who is enrolled as a full-
time student in an accredited institution of higher education or vocational
education shall be paid compensation until such dependent child be-
comes 23 years of age.

(4) If the employee leaves no legal spouse or dependent children
eligible for benefits under this section but leaves other dependents wholly
dependent upon the employee's earnings, such other dependents shall
receive weekly compensation benefits as provided in this subsection until
death, remarriage or so long as such other dependents do not receive
more than 50% of their support from any other earnings or income or
from any other source, except that the maximum benefits payable to all
such other dependents, regardless of the number of such other depen-
dents, shall not exceed a maximum amount of $18,500.

(b) Upon the remarriage of a surviving legal spouse receiving com-
pensation under this section, the benefits being paid to such spouse shall
terminate, except that upon such remarriage 100 weeks of benefits at the
highest rate paid to such spouse under this section shall be paid to such
spouse in one lump sum, except that such lump-sum payment shall be
subject to the maximum amount of compensation payable under this sec-
tion as prescribed by subsection (h).

(c) Where the employee leaves a surviving legal spouse and depen-
dent children who were wholly dependent upon the employee's earnings
and are eligible for benefits under this section 1/2 of the maximum weekly
benefits payable shall be apportioned to such spouse and 1/2 to such de-
pendent children.

(d) If an employee does not leave any dependents who were wholly
dependent upon the employee's earnings at the time of the accident but
leaves dependents, other than a spouse or children, in part dependent on
the employee's earnings, such percentage of a sum equal to three times
the employee's average yearly earnings but not exceeding $18,500 but not
less than $2,500, as such employee's average annual contributions which
the employee made to the support of such dependents during the two
years preceding the date of the accident, bears to the employee's average
yearly earnings during the contemporaneous two-year period, shall be
paid in compensation to such dependents, in weekly payments as pro-
vided in subsection (a), not to exceed $18,500 to all such dependents.

(e) The administrative law judge, except as otherwise provided in this

Ch. 125             1997 Session Laws of Kansas             615

section, shall have the power and authority to apportion and reapportion
the compensation allowed under this section, either to wholly dependent
persons or partially dependent persons, in accordance with the degree of
dependency as of the date of the accident, except that the weekly payment
of compensation to any and all dependents shall not exceed the maximum
weekly benefits provided in subsection (a).

(f) In all cases of death compensable under this section, the employer
shall pay the reasonable expense of burial not exceeding $3,300 $4,300.

(g) The marriage or death of any dependent shall terminate all com-
pensation, under this section, to such dependent, but shall not increase
or decrease the compensation allowed to any other dependents except
that, upon the marriage or death of the surviving legal spouse or a de-
pendent child, the compensation payable to such spouse or child shall be
reapportioned to those, among the surviving legal spouse and dependent
children, who remain eligible to receive compensation under this section.

(h) Notwithstanding any other provision in this section to the con-
trary, the maximum amount of compensation benefits payable under this
section to any and all dependents by the employer shall not exceed a total
amount of $200,000 and when such total amount has been paid the lia-
bility of the employer for any further compensation under this section to
dependents, other than minor children of the employee, shall cease ex-
cept that the payment of compensation under this section to any minor
child of the employee shall continue for the period of the child's minority
at the weekly rate in effect when the employer's liability is otherwise
terminated under this subsection and shall not be subject to termination
under this subsection until such child becomes 18 years of age.

(i) A surviving spouse shall submit an annual statement to the em-
ployer and to the director, in such form and containing such information
relating to eligibility for compensation under this section as may be re-
quired by rules and regulations of the director. If such spouse fails to
submit such an annual statement, the employer may notify the director
of such failure and the director shall notify such spouse of such failure
by certified mail with return receipt. If such spouse fails to submit the
annual statement or fails to reasonably provide the required information
within 30 days after receipt of the notice from the director, all compen-
sation benefits paid under this section to such spouse shall be suspended
until such statement is submitted in proper form to the employer and the
director.

Sec. 6. K.S.A. 44-523 is hereby amended to read as follows: 44-523.
(a) The director, administrative law judge or board shall not be bound by
technical rules of procedure, but shall give the parties reasonable oppor-
tunity to be heard and to present evidence, insure the employee and the
employer an expeditious hearing and act reasonably without partiality.

(b) Whenever a party files an application for hearing pursuant to

616             1997 Session Laws of Kansas             Ch. 125

K.S.A. 44-534 and amendments thereto, the matter shall be assigned to
an administrative law judge for hearing and the administrative law judge
shall set a terminal date to require the claimant to submit all evidence in
support of the claimant's claim no later than 30 days after the first full
hearing before the administrative law judge and to require the respondent
to submit all evidence in support of the respondent's position no later
than 30 days thereafter. An extension of the foregoing time limits shall be
granted if all parties agree. An extension of the foregoing time limits may
also be granted:

(1) If all parties agree;

(2) (1) If the employee is being paid temporary or permanent total
disability compensation;

(3) (2) for medical examination of the claimant if the party requesting
the extension explains in writing to the administrative law judge facts
showing that the party made a diligent effort but was unable to have a
medical examination conducted prior to the submission of the case by the
claimant but then only if the examination appointment was set and notice
of the appointment sent prior to submission by the claimant; or

(4) (3) on application for good cause shown.

(c) When all parties have submitted the case to an administrative law
judge for an award, the administrative law judge shall issue an award
within 30 days. The administrative law judge shall not stay a decision due
to the absence of a submission letter. When the award is not entered in
30 days, any party to the action may notify the director that an award is
not entered and the director shall assign the matter to an assistant director
or to a special administrative law judge who shall enter an award forthwith
based on the evidence in the record, or the director, on the director's
own motion, may remove the case from the administrative law judge who
has not entered an award within 30 days following submission by the party
and assign it to an assistant director or to a special administrative law
judge for immediate decision based on the evidence in the record.

(d) Not less than 10 days prior to the first full hearing before an
administrative law judge, the administrative law judge shall conduct a
prehearing settlement conference for the purpose of obtaining stipula-
tions from the parties, determining the issues and exploring the possibility
that the parties may resolve those issues and reach a settlement prior to
the first full hearing.

Sec. 7. K.S.A. 1996 Supp. 44-532 is hereby amended to read as fol-
lows: 44-532. (a) Where the payment of compensation of the employee
or the employee's dependents is insured by a policy or policies, at the
expense of the employer, or the employer is a member of a qualified
group-funded workers compensation pool, the insurer or the qualified
group-funded workers compensation pool shall be subrogated to the
rights and duties under the workers compensation act of the employer so

Ch. 125             1997 Session Laws of Kansas             617

far as appropriate, including the immunities provided by K.S.A. 44-501
and amendments thereto.

(b) Every employer shall secure the payment of compensation to the
employer's employees by insuring in one of the following ways: (1) By
insuring and keeping insured the payment of such compensation with an
insurance carrier authorized to transact the business of workers compen-
sation insurance in the state of Kansas; (2) by showing to the director that
the employer carries such employer's own risk and is what is known as a
self-insurer and by furnishing proof to the director of the employer's
financial ability to pay such compensation for the employer's self; (3) by
maintaining a membership in a qualified group-funded workers compen-
sation pool. The cost of carrying such insurance or risk shall be paid by
the employer and not the employee.

(c) The knowing and intentional failure of an employer to secure the
payment of workers compensation to the employer's employees as re-
quired in subsection (b) of this section is a class A misdemeanor.

(d) In addition, whenever the director has reason to believe that any
employer has engaged or is engaging in the knowing and intentional fail-
ure to secure the payment of workers compensation to the employer's
employees as required in subsection (b) of this section, the director shall
issue and serve upon such employer a statement of the charges with
respect thereto and shall conduct a hearing in accordance with the Kansas
administrative procedure act, wherein the employer may be liable to the
state for a civil penalty in an amount equal to twice the annual premium
the employer would have paid had such employer been insured or
$25,000, whichever amount is greater.

(e) Any civil penalty imposed or final action taken under this section
shall be subject to review in accordance with the act for judicial review
of agency actions in the district court of Shawnee county.

(f) All moneys received under this section for costs assessed or mon-
etary penalties imposed shall be deposited in the state treasury and cred-
ited to the workers compensation fund.

(g) (1) Every insurance carrier writing workers' compensation insur-
ance for any employment covered under the workers compensation act
shall file, with the director or the director's designee, written notice of
the issuance, nonrenewal or cancellation of a policy or contract of insur-
ance, or any endorsement, providing workers compensation coverage,
within 10 days after such issuance, nonrenewal or cancellation. Every such
insurance carrier shall file, with the director, written notice of all such
policies, contracts and endorsements in force on the effective date of this
act.

(2) Every employer covered by the workers compensation act who is
a qualified self-insurer shall give written notice to the director or the
director's designee, if such employer changes from a self-insurer status to
insuring through an insurance carrier or by maintaining a membership in

618             1997 Session Laws of Kansas             Ch. 125

a qualified group-funded workers compensation pool, such notice to be
given within 10 days after the effective date of such change. Every self-
insurer shall file with the director annually a report verifying the em-
ployer's continuing ability to pay compensation to the employer's em-
ployees.

(3) Every employer covered by the workers compensation act who is
a member of a qualified group-funded workers compensation pool shall
give written notice to the director or the director's designee, if such em-
ployer changes from a group-funded workers compensation pool to in-
suring through an insurance carrier or becoming a self-insurer, such no-
tice to be given within 10 days after the effective date of such change.

(4) The mailing of any written notice or report required by this sub-
section (d) in a stamped envelope within the prescribed time shall comply
with the requirements of this subsection.

(5) The director shall provide by regulation for the forms of written
notices and reports required by this subsection (d).

(h) As used in this section, ``qualified group-funded workers com-
pensation pool'' means any qualified group-funded workers compensation
pool under K.S.A. 44-581 through 44-591 and amendments thereto or
any group-funded pool under the Kansas municipal group-funded pool
act which includes workers compensation and employers' liability under
the workers compensation act.

(i) A private firm shall not be eligible to apply to become a self-insurer
unless it has been in continuous operation for at least five years or is
purchasing an existing self-insured Kansas firm, plant or facility and the
operation of the purchased firm, plant or facility: (1) Has been in contin-
uous operation in Kansas for at least 10 years; (2) has generated an after-
tax profit of at least $1,000,000 annually for the preceding three consec-
utive years; and (3) has a ratio of debt to equity of not greater than 3.5
to 1. As used in this subsection, ``debt'' means the sum of long-term
borrowing maturing in excess of one year plus the current portion of long-
term borrowing plus short-term financial institution borrowing plus com-
mercial paper borrowing, and ``equity'' means the sum of the book value
of stock plus paid-in capital plus retained earnings. The method for cal-
culating the amount of security required of self-insureds shall be reviewed
by an actuary every five years, beginning in fiscal year 1997. The costs
for these actuarial studies shall be paid from the workers compensation
fee fund.

(j) A corporation or other entity whose current identity is attributable
to a merger or other transformation whereby the whole or a substantial
part of a previous entity's assets and income have been transferred to it,
and its liabilities have not increased beyond the financial review require-
ments of the director, which qualified under its previous identity as a self-
insurer under other provisions of this statute, and amendments thereto,
may apply for renewal as a self-insurer under its new name. The director

Ch. 125             1997 Session Laws of Kansas             619

may grant the application for renewal if satisfied that the new entity meets
all necessary financial criteria for renewal that would have been applied
to the previous self-insured entity. An application under these provisions
shall be limited to an entity seeking renewal based upon the prior self-
insured status of another entity or entities.

Sec. 8. K.S.A. 44-534 is hereby amended to read as follows: 44-534.
(a) Whenever the employer, worker, Kansas workers compensation fund
or insurance carrier cannot agree upon the worker's right to compensation
under the workers compensation act or upon any issue in regard to work-
ers compensation benefits due the injured worker thereunder, the em-
ployer, worker or insurance carrier may apply in writing to the director
for a determination of the benefits or compensation due or claimed to be
due. The application shall be in the form prescribed by the rules and
regulations of the director and shall set forth the substantial and material
facts in relation to the claim. Whenever an application is filed under this
section, the matter shall be assigned to an administrative law judge. The
director shall forthwith mail a certified copy of the application to the
adverse party. The administrative law judge shall proceed, upon due and
reasonable notice to the parties, which shall not be less than 20 days, to
hear all evidence in relation thereto and to make findings concerning the
amount of compensation, if any due to the worker.

(b) No proceeding for compensation shall be maintained under the
workers compensation act unless an application for a hearing is on file in
the office of the director within three years of the date of the accident or
within two years of the date of the last payment of compensation, which-
ever is later.

Sec. 9. K.S.A. 1996 Supp. 44-534a is hereby amended to read as
follows: 44-534a. (a) (1) After an application for a hearing has been filed
pursuant to K.S.A. 44-534 and amendments thereto, the employee or the
employer may make application for a preliminary hearing, in such form
as the director may require, on the issues of the furnishing of medical
treatment and the payment of temporary total disability compensation.
At least seven days prior to filing an application for a preliminary hearing,
the applicant shall give written notice to the adverse party of the intent
to file such an application. Such notice of intent shall contain a specific
statement of the benefit change being sought that is to be the subject of
the requested preliminary hearing. If the parties do not agree to the
change of benefits within the seven-day period, the party seeking a change
in benefits may file an application for preliminary hearing which shall be
accompanied by a copy of the notice of intent and the applicant's certi-
fication that the notice of intent was served on the adverse party or that
party's attorney and that the request for a benefit change has either been
denied or was not answered within seven days after service. Copies of
medical reports or other evidence which the party intends to produce as

620             1997 Session Laws of Kansas             Ch. 125

exhibits supporting the change of benefits shall be included with the ap-
plication. The director shall assign the application to an administrative
law judge who shall set the matter for a preliminary hearing and shall give
at least seven days' written notice by mail to the parties of the date set
for such hearing.

(2) Such preliminary hearing shall be summary in nature and shall be
held by an administrative law judge in any county designated by the ad-
ministrative law judge, and the administrative law judge shall exercise
such powers as are provided for the conduct of full hearings on claims
under the workers compensation act. Upon a preliminary finding that the
injury to the employee is compensable and in accordance with the facts
presented at such preliminary hearing, the administrative law judge may
make a preliminary award of medical compensation and temporary total
disability compensation to be in effect pending the conclusion of a full
hearing on the claim, except that if the employee's entitlement to medical
compensation or temporary total disability compensation is disputed or
there is a dispute as to the compensability of the claim, no preliminary
award of benefits shall be entered without giving the employer the op-
portunity to present evidence, including testimony, on the disputed is-
sues. A finding with regard to a disputed issue of whether the employee
suffered an accidental injury, whether the injury arose out of and in the
course of the employee's employment, whether notice is given or claim
timely made, or whether certain defenses apply, shall be considered ju-
risdictional, and subject to review by the board. Such review by the board
shall not be subject to judicial review. If an appeal from a preliminary
order is perfected under this section, such appeal shall not stay the pay-
ment of medical compensation and temporary total disability compen-
sation from the date of the preliminary award. If temporary total com-
pensation is awarded, such compensation may be ordered paid from the
date of filing the application, except that if the administrative law judge
finds from the evidence presented that there were one or more periods
of temporary total disability prior to such filing date, temporary total com-
pensation may be ordered paid for all periods of temporary total disability
prior to such date of filing. The decision in such preliminary hearing shall
be rendered within five days of the conclusion of such hearing. Except
as provided in this section, no such preliminary findings or preliminary
awards shall be appealable by any party to the proceedings, and the same
shall not be binding in a full hearing on the claim, but shall be subject to
a full presentation of the facts.

(b) If compensation in the form of medical benefits or temporary
total disability benefits has been paid by the employer or the employer's
insurance carrier either voluntarily or pursuant to an award entered under
this section and, upon a full hearing on the claim, the amount of com-
pensation to which the employee is entitled is found to be less than the
amount of compensation paid or is totally disallowed, the employer and

Ch. 125             1997 Session Laws of Kansas             621

the employer's insurance carrier shall be reimbursed from the workers
compensation fund established in K.S.A. 44-566a and amendments
thereto, for all amounts of compensation so paid which are in excess of
the amount of compensation the employee is entitled to less any amount
deducted from additional disability benefits due the employee pursuant
to subsection (c) of K.S.A. 44-525, and amendments thereto, as deter-
mined in the full hearing on the claim. The director shall determine the
amount of compensation paid by the employer or insurance carrier which
is to be reimbursed under this subsection, and the director shall certify
to the commissioner of insurance the amount so determined. Upon re-
ceipt of such certification, the commissioner of insurance shall cause pay-
ment to be made to the employer or the employer's insurance carrier in
accordance therewith. No reimbursement shall be certified unless the re-
quest is made by the employer or employer's insurance carrier within one
year of the final award.

Sec. 10. K.S.A. 44-536 is hereby amended to read as follows: 44-536.
(a) With respect to any and all proceedings in connection with any initial
or original claim for compensation, no claim of any attorney for services
rendered in connection with the securing of compensation for an em-
ployee or the employee's dependents, whether secured by agreement,
order, award or a judgment in any court shall exceed (1) a reasonable
amount for such services or (2) the amount equal to the total of 25% of
that portion of total compensation recovered and paid which is less than
$10,001, 20% of that portion of total compensation recovered and paid
which is greater than $10,000 and less than $20,001, and 15% of that
portion of the total amount of the compensation recovered and paid
which is in excess of $20,000 25% of the amount of compensation recov-
ered and paid, whichever is less, in addition to actual expenses incurred,
and subject to the other provisions of this section. Except as hereinafter
provided in this section, in death cases, total disability and partial disability
cases, the amount of attorney fees shall not be based upon compensation
exceed 25% of the sum which would be due under the workers compen-
sation act beyond 415 weeks of permanent total disability based upon the
employee's average gross weekly wage prior to the date of the accident
and subject to the maximum weekly benefits provided in K.S.A. 44-510c
and amendments thereto.

(b) All attorney fees in connection with the initial or original claim
for compensation shall be fixed pursuant to a written contract between
the attorney and the employee or the employee's dependents, which shall
be subject to approval by the director in accordance with this section.
Every attorney, whether the disposition of the original claim is by agree-
ment, settlement, award, judgment or otherwise, shall file the attorney
contract with the director for review in accordance with this section. The
director shall review each such contract and the fees claimed thereunder

622             1997 Session Laws of Kansas             Ch. 125

as provided in this section and shall approve such contract and fees only
if both are in accordance with all provisions of this section. Any claims
for attorney fees not in excess of the limits provided in this section and
approved by the director shall be enforceable as a lien on the compen-
sation due or to become due. The director shall specifically and individ-
ually review each claim of an attorney for services rendered under the
workers compensation act in each case of a settlement agreement under
K.S.A. 44-521 and amendments thereto or a lump-sum payment under
K.S.A. 44-531 and amendments thereto as to the reasonableness thereof.
In reviewing the reasonableness of such claims for attorney fees, the di-
rector shall consider the other provisions of this section and the following:

(1) The written offers of settlement made prior to representation re-
ceived by the employee prior to execution of a written contract between
the employee and the attorney; the employer shall attach to the settlement
worksheet copies of any written offers of settlement which were sent to
the employee before the employer was aware that the employee had hired
an attorney;

(2) the time and labor required, the novelty and difficulty of the ques-
tions involved and the skill requisite to perform the legal services prop-
erly;

(3) the likelihood, if apparent to the employee or the employee's de-
pendents, that the acceptance of the particular case will preclude other
employment by the attorney;

(4) the fee customarily charged in the locality for similar legal serv-
ices;

(5) the amount of compensation involved and the results obtained;

(6) the time limitations imposed by the employee, by the employee's
dependents or by the circumstances;

(7) the nature and length of the professional relationship with the
employee or the employee's dependents; and

(8) the experience, reputation and ability of the attorney or attorneys
performing the services.

(c) No attorney fees shall be charged with respect to compensation
for medical expenses, except where an allowance is made for proposed
or future treatment as a part of a compromise settlement. No attorney
fees shall be charged with respect to vocational rehabilitation benefits.

(d) No attorney fees shall be charged in connection with any tem-
porary total disability compensation unless the payment of such compen-
sation in the proper amount is refused, or unless such compensation is
terminated by the employer and the payment of such compensation is
obtained or reinstated by the efforts of the attorney, whether by agree-
ment, settlement, award or judgment.

(e) With regard to any claim where there is no dispute as to any of
the material issues prior to representation of the claimant or claimants
by an attorney, or where the amount to be paid for compensation does

Ch. 125             1997 Session Laws of Kansas             623

not exceed the written offer made to the claimant or claimants by the
employer prior to representation by execution of a written contract be-
tween the employee and an attorney, the fees to any such attorney shall
not exceed either the sum of $250 or a reasonable fee for the time actually
spent by the attorney, as determined by the director, whichever is greater,
exclusive of reasonable attorney fees for any representation by such at-
torney in reference to any necessary probate proceedings. With regard to
any claim where the amount to be paid for compensation does exceed
the written offer made prior to representation, fees for services rendered
by an attorney shall not exceed the lesser of (1) a reasonable amount for
such services or; (2) the an amount equal to the total of 25% 50% of that
portion of the amount of compensation recovered and paid, which is in
excess of the amount of compensation offered to the employee by the
employer prior to the execution of a written contract between the em-
ployee and the attorney; or attorney's entry of appearance in the claim
and which is less than $10,001, 20% of that portion of the amount of
compensation recovered and paid, which is in excess of the amount of
compensation offered to the employee prior to the attorney's entry of
appearance in the claim and which is more than $10,000 and less than
$20,001 and 15% of that portion of the amount of compensation recov-
ered and paid, which is in excess of the amount of compensation offered
to the employee prior to the attorney's entry of appearance in the claim
and which is in excess of $20,000, as specified in subsection (a). (3) 25%
of the total amount of compensation recovered and paid as described in
subsection (a).

(f) All attorney fees for representation of an employee or the em-
ployee's dependents shall be only recoverable from compensation actually
paid to such employee or dependents, except as specifically provided
otherwise in subsection (g) and (h).

(g) In the event any attorney renders services to an employee or the
employee's dependents, subsequent to the ultimate disposition of the
initial and original claim, and in connection with an application for review
and modification, a hearing for additional medical benefits, an application
for penalties or otherwise, such attorney shall be entitled to reasonable
attorney fees for such services, in addition to attorney fees received or
which the attorney is entitled to receive by contract in connection with
the original claim, and such attorney fees shall be awarded by the director
on the basis of the reasonable and customary charges in the locality for
such services and not on a contingent fee basis. If the services rendered
under this subsection by an attorney result in an additional award of dis-
ability compensation, the attorney fees shall be paid from such amounts
of disability compensation. If such services involve no additional award
of disability compensation, but result in an additional award of medical
compensation, penalties, or other benefits, the director shall fix the proper
amount of such attorney's attorney fees in accordance with this subsection

624             1997 Session Laws of Kansas             Ch. 125

and such fees shall be paid by the employer or the workers compensation
fund, if the fund is liable for compensation pursuant to K.S.A. 44-567 and
amendments thereto, to the extent of the liability of the fund. If the
services rendered herein result in a denial of additional compensation, the
director may authorize a fee to be paid by the respondent.

(h) Any and all disputes regarding attorney fees, whether such dis-
putes relate to which of one or more attorneys represents the claimant
or claimants or is entitled to the attorney fees, or a division of attorney
fees where the claimant or claimants are or have been represented by
more than one attorney, or any other disputes concerning attorney fees
or contracts for attorney fees, shall be heard and determined by the ad-
ministrative law judge, after reasonable notice to all interested parties and
attorneys.

(i) After reasonable notice and hearing before the administrative law
judge, any attorney found to be in violation of any provision of this section
shall be required to make restitution of any excess fees charged.

Sec. 11. K.S.A. 44-550b is hereby amended to read as follows: 44-
550b. (a) All records provided to be maintained under K.S.A. 44-550 and
amendments thereto and not withstanding the provisions of K.S.A. 45-
215, et seq., and amendments thereto, shall be open to public inspection,
except that:

(1) Records relating to financial information submitted by an em-
ployer to qualify as a self-insurer pursuant to K.S.A 44-532 and amend-
ments thereto and;

(2) records which relate to utilization review or peer review con-
ducted pursuant to K.S.A. 44-510 and amendments thereto shall not be
disclosed except to the health care provider and as otherwise specifically
provided by the workers compensation act.;

(3) records relating to private premises safety inspections;

(4) medical records, forms collected pursuant to K.S.A. 44-567(b) and
amendments thereto and accident reports maintained under K.S.A. 44-
550 and amendments thereto pertaining to an individual shall not be
disclosed except:

(A) Upon order of a court of competent jurisdiction;

(B) to the employer, its insurance carrier or its representative, from
whom a worker seeks workers compensation benefits;

(C) to the division of workers compensation for its own records for
its purposes;

(D) to federal or state governmental agencies for purposes of fraud
and abuse investigations;

(E) to an employer in connection with any application for employ-
ment to an employer, its insurance carrier or representatives providing
(i) a conditional offer of employment has been made and (ii) the request
for records includes a signed release by the individual, identifies the job

Ch. 125             1997 Session Laws of Kansas             625

conditionally offered by the employer and is submitted in writing, either
by mail or electronic means. Requests relating to an individual under this
subsection shall be considered a record to be maintained and open to
public inspection under K.S.A. 44-550 and amendments thereto;

(F) to the workers compensation fund for its own purposes; and

(G) to the worker upon written release by the worker.

(b) This section shall be part of and supplemental to the workers
compensation act.

Sec. 12. K.S.A. 1996 Supp. 44-551 is hereby amended to read as
follows: 44-551. (a) The duties of the assistant directors of workers com-
pensation shall include but not be limited to acting in the capacity of an
administrative law judge.

(b) (1) Administrative law judges shall have power to administer
oaths, certify official acts, take depositions, issue subpoenas, compel the
attendance of witnesses and the production of books, accounts, papers,
documents and records to the same extent as is conferred on the district
courts of this state, and may conduct an investigation, inquiry or hearing
on all matters before the administrative law judges. All acts, findings final
orders, awards, decisions, rulings or modifications of findings or awards,
or preliminary awards under K.S.A. 44-534a and amendments thereto
made by an administrative law judge shall be subject to review by the
board upon written request of any interested party within 10 days. Inter-
mediate Saturdays, Sundays and legal holidays shall be excluded in the
time computation. Review by the board shall be a prerequisite to judicial
review as provided for in K.S.A. 44-556 and amendments thereto. On any
such review, the board shall have authority to grant or refuse compen-
sation, or to increase or diminish any award of compensation or to remand
any matter to the administrative law judge for further proceedings. The
orders of the board under this subsection shall be issued within 30 days
from the date arguments were presented by the parties.

(2) (A) If an administrative law judge has entered a preliminary
award under K.S.A. 44-534a and amendments thereto, a review by the
board shall not be conducted under this section unless it is alleged that
the administrative law judge exceeded the administrative law judge's ju-
risdiction in granting or denying the relief requested at the preliminary
hearing. Such an appeal from a preliminary award may be heard and
decided by a single member of the board. Members of the board shall
hear such preliminary appeals on a rotating basis and the individual board
member who decides the appeal shall sign each such decision. The orders
of the board on any acts, findings, awards, decisions, rulings or modifi-
cations of findings or awards under this subsection shall be issued within
30 days from the date arguments were presented by the parties.

(B) If an order on review is not issued by the board within the ap-
plicable time period prescribed by subsection (b)(2)(A) (1), medical com-

626             1997 Session Laws of Kansas             Ch. 125

pensation and any disability compensation as provided in the award of
the administrative law judge shall be paid commencing with the first day
after such time period and shall continue to be paid until the order of
the board is issued, except that no payments shall be made under this
provision for any period before the first day after such time period. Noth-
ing in this section shall be construed to limit or restrict any other remedies
available to any party to a claim under any other statute.

(C) In any case in which the final award of an administrative law judge
is appealed to the board for review under this section and in which the
compensability is not an issue to be decided on review by the board,
medical compensation shall be payable in accordance with the award of
the administrative law judge and shall not be stayed pending such review.
The employee may proceed under K.S.A. 44-534a and amendments
thereto and may have a hearing in accordance with that statute to enforce
the provisions of this subsection.

(c) Each assistant director and each administrative law judge or spe-
cial administrative law judge shall be allowed all reasonable and necessary
expenses actually incurred while in the actual discharge of official duties
in administering the workers compensation act, but such expenses shall
be sworn to by the person incurring the same and be approved by the
secretary.

(d) In case of emergency the director may appoint special local ad-
ministrative law judges and assign to them the examination and hearing
of any designated case or cases. Such special local administrative law
judges shall be attorneys and admitted to practice law in the state of
Kansas and shall, as to all cases assigned to them, exercise the same pow-
ers as provided by this section for the regular administrative law judges.
Special local administrative law judges shall receive a fee commensurate
with the services rendered as fixed by rules and regulations adopted by
the director. The fees prescribed by this section prior to the effective date
of this act shall be effective until different fees are fixed by such rules
and regulations.

(e) All special local administrative law judge's fees and expenses, with
the exception of settlement hearings, shall be paid from the workers com-
pensation administration fee fund, as provided in K.S.A. 74-712 and
amendments thereto. Where there are no available funds or where the
special local administrative law judge conducted a settlement hearing, the
fees shall be taxed as cost costs in each case heard by such special local
administrative law judge and when collected shall be paid directly to such
special local administrative law judge by the party charged with the pay-
ment of the same.

(f) Except as provided for judicial review under K.S.A. 44-556 and
amendments thereto, the decisions and awards of the board shall be final.

Sec. 13. K.S.A. 1996 Supp. 44-555c is hereby amended to read as

Ch. 125             1997 Session Laws of Kansas             627

follows: 44-555c. (a) There is hereby established the workers compen-
sation board. The board shall have exclusive jurisdiction to review all
decisions, findings, orders and awards of compensation of administrative
law judges under the workers compensation act. The review by the board
shall be upon questions of law and fact as presented and shown by a
transcript of the evidence and the proceedings as presented, had and
introduced before the administrative law judge. The board shall be within
the division of workers compensation of the department of human re-
sources and all budgeting, personnel, purchasing and related manage-
ment functions of the board shall be administered under the supervision
and direction of the secretary of human resources. The board shall consist
of five members who shall be appointed by the secretary in accordance
with this section and who shall each serve for a term of four years, except
as provided for the first members appointed to the board under subsec-
tion (f).

(b) Each board member shall be an attorney regularly admitted to
practice law in Kansas for a period of at least seven years and shall have
engaged in the active practice of law during such period as a lawyer, judge
of a court of record or any court in Kansas or a full-time teacher of law
in an accredited law school, or any combination of such types of practice.

(c) Each board member shall receive an annual salary in an amount
equal to the salary prescribed by law for a district judge, except that the
member who is the chairperson of the workers compensation board shall
receive an annual salary in an amount equal to the salary prescribed for
a district judge designated as administrative judge of a district court of
Kansas. The board members shall devote full time to the duties of such
office and shall not engage in the private practice of law during their term
of office. No board member may receive additional compensation for
official services performed by the board member. Each board member
shall be reimbursed for expenses incurred in the performance of such
official duties under the same circumstances and to the same extent as
judges of the district court are reimbursed for such expenses.

(d) Applications for membership on the board shall be submitted to
the director of workers compensation. The director shall determine if an
applicant meets the qualifications for membership on the board pre-
scribed in subsection (b). Qualified applicants for the board will be sub-
mitted by the director to the workers compensation board nominating
committee for consideration.

(e) There is hereby established the workers compensation board
nominating committee which shall be composed of two members ap-
pointed as follows: The Kansas AFL-CIO and the Kansas chamber of
commerce and industry shall each select one representative to serve on
the workers compensation board nominating committee and shall give
written notice of the selection to the secretary who shall appoint such
representatives to the committee. In the event of a vacancy occurring for

628             1997 Session Laws of Kansas             Ch. 125

any reason on the nominating committee, the respective member shall
be replaced by the appointing organization with written notice of the
appointment to the secretary of human resources within 30 days of such
vacancy.

(f) (1) Upon being notified of any vacancy on the board or of the
need to appoint a member pro tem under subsection (i), the nominating
committee shall consider all qualified applicants submitted by the director
for the vacant position on the board or the member pro tem position and
nominate a person qualified therefor. The nominating committee shall
be required to reach unanimous agreement on any nomination to the
board. With respect to each person nominated, the secretary either shall
accept and appoint the person nominated by the nominating committee
to the position on the board for which the nomination was made or shall
reject the nomination and request the nominating committee to nominate
another person for that position. Upon receipt of any such request for
the nomination of another person, the nominating committee shall nom-
inate another person for that position in the same manner.

(2) The first members of the board established by this section are
hereby appointed as follows: Each person who was a member of the
workers compensation board which was in existence on January 12, 1995,
is hereby appointed, effective January 13, 1995, as a member of the board
established by this section. The term of office of each person so appointed
as a member of the board established by this section is for the period
equal to the remainder of the term of office such person had as of January
12, 1995, as a member of the workers compensation board which was in
existence on January 12, 1995.

(3) Each member of the board shall hold office for the term of the
appointment and until the successor shall have been appointed. Succes-
sors to such members shall be appointed for terms of four years.

(4) If a vacancy should occur on the board during the term of a mem-
ber, the nominating committee shall nominate an individual from the
qualified applicants submitted by the director to complete the remainder
of the unexpired portion of the term. With respect to each person so
nominated, the secretary either shall accept and appoint the person nom-
inated to the board or shall reject the nomination and request the nom-
inating committee to nominate another person for the position. Upon
receipt of any such request for the nomination of another person, the
nominating committee shall nominate another person for the position in
the same manner.

(g) Following the completion of a term, board members who wish to
be considered for reappointment to the board shall be deemed to have
met the qualification requirements for selection to the board and shall
be considered for renomination by the workers compensation board nom-
inating committee.

Ch. 125             1997 Session Laws of Kansas             629

(h) The members of the board shall annually elect one member to
serve as chairperson.

(i) If illness or other temporary disability of a member of the board
will not permit the member to serve during a case or in any case in which
a member of the board must be excused from serving because of a conflict
or is otherwise disqualified with regard to such case, the director shall
notify the workers compensation nominating committee of the need to
appoint a member pro tem. Upon receipt of such notice, the committee
shall act as soon as possible and nominate a qualified person to serve as
member pro tem in such case in accordance with subsection (f). Each
member pro tem shall receive compensation at the same rate as a member
of the board receives, prorated for the days hours of actual service as a
member pro tem and shall receive expenses under the same circum-
stances and to the same extent as a member of the board receives. Each
member pro tem shall have all the powers, duties and functions of a
member of the board with regard to the case.

(j) The board shall maintain principal offices in Topeka, Kansas, and
the board may conduct hearings at a courthouse of any county in Kansas
or at another location specified by the board. The secretary of human
resources shall provide a courtroom and other suitable quarters in To-
peka, Kansas, for the use of the board and its staff. When the board
conducts hearings at any location other than in Topeka, Kansas, the di-
rector shall make suitable arrangements for such hearings. Subject to the
provisions of appropriation acts, the director shall provide such supplies
and equipment and shall appoint such support personnel as may be nec-
essary for the board to fulfill the duties imposed by this act, subject to
approval by the secretary.

(k) For purposes of hearing cases, the board may sit together or in
panels of two members or more, designated by the chairperson of the
board, except that an appeal from a preliminary award entered under
K.S.A. 44-534a and amendments thereto may be heard by a panel of one
member designated by the chairperson. All members of the board shall
determine each matter before the board. All decisions, reviews and de-
terminations by the board shall be approved in writing by at least three
board members. Whenever the board enters a final order in any pro-
ceeding, the board shall make written findings of fact and conclusions of
law forming the basis of the board's determination and final order. The
findings of fact and conclusions of law of the board shall be made a part
of the final order. The board shall mail a copy of the final order of the
board to all parties to the proceeding within three days following the
issuance of the final order.

Sec. 14. K.S.A. 44-557a is hereby amended to read as follows: 44-
557a. (a) The director shall: (1) Compile and publish statistics to deter-
mine the causation of compensable disabilities in the state of Kansas and

630             1997 Session Laws of Kansas             Ch. 125

(2) compile and maintain a database of information on claim character-
istics and costs related to open and closed claims, in order to determine
the effectiveness of the workers compensation act to provide adequate
indemnity, medical and vocational rehabilitation compensation to injured
workers and to return injured workers to remunerative employment. The
commissioner of insurance shall cooperate with the director and shall
make available any information which will assist the director in compiling
such information and statistics and may contract with the director and
the secretary of the department of health and environment to collect such
information as the director deems necessary.

(b) A primary source of such information and statistics shall be the
compliance of employers, group-funded workers compensation pools and
insurance carriers in reporting of all accidents which are required to be
reported under the workers compensation act. Each self-insured em-
ployer, group-funded workers compensation pool, insurance carrier and
vocational rehabilitation provider shall submit to the director the dispo-
sition of a statistically significant sample of open and closed claims under
the act and, in connection with the closing of each claim in which pay-
ments were made, the following: (1) The dates, time intervals, amounts
and types of weekly disability payments made, (2) the dates and gross
amounts of payments made to each type of medical compensation pro-
vider, (3) the dates and type of service for which payment was made and
the gross amounts paid to each vocational rehabilitation provider, and (4)
the dates and types of fees paid as claim costs. The director shall prescribe
by rules and regulations such formats, computer media and methods as
may be necessary to provide information to the director on a periodic
basis. Each self-insured employer, group-funded workers compensation
pool, insurance carrier, vocational rehabilitation provider, health care
provider or health care facility shall submit medical information, by pro-
cedure, charge and zip code of the provider in order to set the maximum
medical fee schedule. The director of workers compensation may adopt
and promulgate such rules and regulations as the director deems neces-
sary for the purposes of administering and enforcing the provisions of this
section.

(c) The director may contract for professional actuarial or statistical
services to provide assistance in determining the types of information and
the methods of selecting and analyzing information as may be necessary
for the director to conduct studies of open and closed claims under the
workers compensation act and to enable the director to make valid sta-
tistical conclusions as to the distribution of costs of workers compensation
benefits.

(d) The director shall obtain such office and computer equipment
and employ such additional clerical help as the director deems necessary
to gather such information and prepare such statistics.

Ch. 125             1997 Session Laws of Kansas             631

Sec. 15. K.S.A. 1996 Supp. 44-566a is hereby amended to read as
follows: 44-566a. (a) There is hereby created in the state treasury the
workers compensation fund. The commissioner of insurance shall be re-
sponsible for administering the workers compensation fund, and all pay-
ments from the workers compensation fund shall be upon warrants of the
director of accounts and reports issued pursuant to vouchers approved
by the commissioner of insurance or a person or persons designated by
the commissioner. The commissioner of insurance annually shall report
to the governor and the legislature the receipts and disbursements from
the workers compensation fund during the preceding fiscal year.

(b) (1) On June 1 of each year, the commissioner of insurance shall
impose an assessment against all insurance carriers, self-insurers and
group-funded workers compensation pools insuring the payment of com-
pensation under the workers compensation act, and the same shall be due
and payable to the commissioner on the following July 1, the proceeds of
which shall be credited to the workers compensation fund. The total
amount of each such assessment shall be equal to an amount sufficient,
in the opinion of the commissioner of insurance, to pay all amounts, in-
cluding attorney fees and costs, which may be required to be paid from
such fund during the current fiscal year, less the amount of the estimated
unencumbered balance in the workers compensation fund as of the June
30 immediately preceding the date the assessment is due and payable
under this section. The total amount of each such assessment shall be
apportioned among those upon whom it is imposed, such that each is
assessed an amount that bears the same relation to such total assessment
as the amount of money paid or payable in workers compensation claims
by such insurance carrier, self-insurer or group-funded workers compen-
sation pool in the immediately preceding calendar year bears to all such
claims paid or payable during such calendar year. The commissioner of
insurance may establish experience-based rates of assessments under this
subsection and make adjustments in the assessments imposed under this
subsection based on the success of accident prevention programs under
K.S.A. 44-5,104 and amendments thereto and other employer safety pro-
grams.

(2) The commissioner of insurance shall remit all moneys received
by or for such commissioner under this subsection to the state treasurer.
Upon receipt of any such remittance the state treasurer shall deposit the
entire amount thereof in the state treasury to the credit of the workers
compensation fund.

(c) (1) Whenever the workers compensation fund may be made lia-
ble for the payment of any amounts in proceedings under the workers
compensation act, the commissioner of insurance, in the capacity of ad-
ministrator of such fund, shall be impleaded in such proceedings and shall
represent and defend the workers compensation fund. The commissioner
of insurance shall be deemed impleaded in any such proceedings when-

632             1997 Session Laws of Kansas             Ch. 125

ever written notice of the proceedings setting forth the nature of the
liability asserted against the workers compensation fund, is given to the
commissioner of insurance. The commissioner of insurance may be made
a party in this manner by any party to the proceedings. A copy of the
written notice shall be given to the director and to all other parties to the
proceedings.

(2) The administrative law judge shall dismiss the workers compen-
sation fund from any proceeding where the administrative law judge has
determined that there is insufficient evidence to indicate involvement by
the workers compensation fund.

(3) In any case in which the workers compensation fund has been
impleaded, if the liability of the fund has not been established within five
years of the date of the employee filing a written notice of claim, the
commissioner of insurance may cause to be filed with an administrative
law judge a motion to dismiss the fund from the case. The administrative
law judge shall notify counsel of record not less than 10 days prior to
issuing any order dismissing the fund from a case. The administrative law
judge shall dismiss the fund from any such case absent a showing by one
of the parties that the case should be left open due to medical necessity
or other just cause by the employer or insurance carrier and where an
award has been entered deciding all of the issues in the employee's claim
against the employer, but not deciding the issues between the employer
and the fund, the fund may file an application with the administrative
law judge requesting that the fund be dismissed from the case with prej-
udice. The employer shall have a period of six months from the filing of
the application in which to complete the employer's evidence on the fund
issues and submit the case to the administrative law judge for decision.
The fund shall then have a period of 60 days after the submission of the
employer's evidence to submit its own evidence concerning the fund issues
in the case. If the employer fails to do so, the administrative law judge
shall dismiss the fund from the case with prejudice on the judge's own
motion.

(d) The commissioner of insurance, in the capacity of administrator
of the workers compensation fund, may make settlements of any amounts
which may be payable from the workers compensation fund with regard
to any claim under the workers compensation act, subject to the approval
of the director.

(e) The workers compensation fund shall be liable for:

(1) Payment of awards to handicapped employees in accordance with
the provisions of K.S.A. 44-569 and amendments thereto for claims aris-
ing prior to July 1, 1994;

(2) payment of workers compensation benefits to an employee who
is unable to receive such benefits from such employee's employer under
the conditions prescribed by K.S.A. 44-532a and amendments thereto;

(3) reimbursement of an employer or insurance carrier pursuant to

Ch. 125             1997 Session Laws of Kansas             633

the provisions of K.S.A. 44-534a and amendments thereto, subsection (d)
of K.S.A. 44-556 and amendments thereto, subsection (c) of K.S.A. 44-
569 and amendments thereto and K.S.A. 44-569a and amendments
thereto;

(4) payment of the actual expenses of the commissioner of insurance
which are incurred for administering the workers compensation fund,
subject to the provisions of appropriations acts; and

(5) any other payments or disbursements provided by law.

(f) If it is determined that the workers compensation fund is not liable
as described in subsection (e), attorney fees incurred by the workers com-
pensation fund may be assessed against the party who has impleaded the
workers compensation fund other than impleadings pursuant to K.S.A.
44-532a and amendments thereto.

(g) The commissioner of insurance shall provide for the implemen-
tation of the workers compensation fund as provided in this section and
shall be responsible for ensuring the fund's adequacy to meet and pay
claims awarded against it.

Sec. 16. K.S.A. 44-567 is hereby amended to read as follows: 44-567.
(a) An employer who operates within the provisions of the workers com-
pensation act and who knowingly employs or retains a handicapped em-
ployee, as defined in K.S.A. 44-566 and amendments thereto shall be
relieved of liability for compensation awarded or be entitled to an appor-
tionment of the costs thereof as follows:

(1) Whenever a handicapped employee is injured or is disabled or
dies as a result of an injury which occurs prior to July 1, 1994, and the
administrative law judge awards compensation therefor and finds the in-
jury, disability or the death resulting therefrom probably or most likely
would not have occurred but for the preexisting physical or mental im-
pairment of the handicapped employee, all compensation and benefits
payable because of the injury, disability or death shall be paid from the
workers compensation fund; and

(2) subject to the other provisions of the workers compensation act,
whenever a handicapped employee is injured or is disabled or dies as a
result of an injury and the administrative law judge finds the injury prob-
ably or most likely would have been sustained or suffered without regard
to the employee's preexisting physical or mental impairment but the re-
sulting disability or death was contributed to by the preexisting impair-
ment, the administrative law judge shall determine in a manner which is
equitable and reasonable the amount of disability and proportion of the
cost of award which is attributable to the employee's preexisting physical
or mental impairment, and the amount so found shall be paid from the
workers compensation fund.

(b) In order to be relieved of liability under this section, the employer
must prove either the employer had knowledge of the preexisting im-

634             1997 Session Laws of Kansas             Ch. 125

pairment at the time the employer employed the handicapped employee
or the employer retained the handicapped employee in employment after
acquiring such knowledge. The employer's knowledge of the preexisting
impairment may be established by any evidence sufficient to maintain the
employer's burden of proof with regard thereto. If the employer, prior
to the occurrence of a subsequent injury to a handicapped employee, files
with the director a notice of the employment or retention of such em-
ployee, together with a description of the handicap claimed, such notice
and description of handicap shall create a presumption that the employer
had knowledge of the preexisting impairment. If the employer files a
written notice of an employee's preexisting impairment with the director
in a form approved by the director therefor, such notice establishes the
existence of a reservation in the mind of the employer when deciding
whether to hire or retain the employee.

(c) Knowledge of the employee's preexisting impairment or handicap
at the time the employer employs or retains the employee in employment
shall be presumed conclusively if the employee, in connection with an
application for employment or an employment medical examination or
otherwise in connection with obtaining or retaining employment with the
employer, knowingly: (1) Misrepresents that such employee does not have
such an impairment or handicap; (2) misrepresents that such employee
has not had any previous accidents; (3) misrepresents that such employee
has not previously been disabled or compensated in damages or otherwise
because of any prior accident, injury or disease; (4) misrepresents that
such employee has not had any employment terminated or suspended
because of any prior accident, injury or disease; (5) misrepresents that
such employee does not have any mental, emotional or physical impair-
ment, disability, condition, disease or infirmity; or (6) misrepresents or
conceals any facts or information which are reasonably related to the
employee's claim for compensation.

(d) An employer shall not be relieved of liability for compensation
awarded nor shall an employer be entitled to an apportionment of the
costs thereof as provided in this section, unless the employer shall cause
the commissioner of insurance, in the capacity of administrator of the
workers compensation fund, to be impleaded, as provided in K.S.A. 44-
566a and amendments thereto, in any proceedings to determine the com-
pensation to be awarded a handicapped employee who is injured or dis-
abled or has died, by giving written notice of the employee's claim to the
commissioner of insurance ten days prior to the first full hearing where
any evidence is presented on the claim.

(e) Amendments to this section shall apply only to cases where a
handicapped employee, or the employee's dependents, claims compen-
sation as a result of an injury occurring after the effective date of such
amendments.

(f) The total amount of compensation due the employee shall be the

Ch. 125             1997 Session Laws of Kansas             635

amount for disability computed as provided in K.S.A. 44-503a, 44-510
through 44-510g and 44-511, and amendments thereto, and in no case
shall the payments be less nor more than the amounts provided in K.S.A.
44-510c and amendments thereto.

Sec. 17. K.S.A. 1996 Supp. 44-585 is hereby amended to read as
follows: 44-585. (a) Premium contributions to the pool shall be based
upon appropriate manual classification and rates, plus or minus applicable
experience credits or debits, and minus any advance discount approved
by the trustees, not to exceed 15% of manual premium. The pool must
use rules, classifications and rates as promulgated by the national council
on compensation insurance an approved rating organization and must
report premium and loss data to a rating organization. Such rates shall
either be the rates effective June 1, 1994, or the prospective loss costs,
as defined in K.S.A. 40-1113, and amendments thereto, plus expenses
necessary to administer the pool. For purposes of subsection (b) the pro-
spective loss costs shall be presumed to be the 70% required to be de-
posited in the claims fund. If the pool has been in operation for more
than five years, the board of trustees may determine such rates as ap-
proved by the commissioner.

(b) At least 70% of the annual premium shall be placed into a des-
ignated depository for the sole purpose of paying claims. If so approved
by the commissioner of insurance, the annual premium to be designated
to such depository may be determined to be the net amount of premium
after all or a portion of the specific and aggregate excess insurance pre-
mium costs have been paid. This shall be called the claims fund account.
The remaining annual premium shall be placed into a designated depos-
itory for the payment of taxes, fees and administrative costs. This shall be
called the administrative fund account.

(c) Any surplus moneys for a fund year in excess of the amount nec-
essary to fulfill all obligations under the workers compensation act for
that fund year may be declared to be refundable by the trustees not less
than 12 months after the end of the fund year, upon the approval of the
commissioner. Such approval can be obtained only upon satisfactory ev-
idence that sufficient funds remain on deposit for the payment of all
outstanding claims and expenses, including incurred but not reported
claims. Any such refund shall be paid only to those employers who re-
mained participants in the pool for an entire year. Payment of previously
earned refunds shall not be contingent on continued membership in the
pool.

Sec. 18. K.S.A. 44-5,120 is hereby amended to read as follows: 44-
5,120. (a) The director of workers compensation is hereby authorized and
directed to establish a system for monitoring, reporting and investigating
suspected fraud or abuse by any persons who are not licensed or regulated
by the commissioner of insurance in connection with securing the liability

636             1997 Session Laws of Kansas             Ch. 125

of an employer under the workers compensation act or in connection
with claims or benefits thereunder. The commissioner of insurance is
hereby authorized and directed to establish a system for monitoring, re-
porting and investigating suspected fraud or abuse by any persons who
are licensed or regulated by the commissioner of insurance in connection
with securing the liability of an employer under the workers compensa-
tion act or in connection with claims thereunder.

(b) This section applies to:

(1) Persons claiming benefits under the workers compensation act;

(2) employers subject to the requirements of the workers compen-
sation act;

(3) insurance companies including group-funded self-insurance plans
covering Kansas employers and employees;

(4) any person, corporation, business, health care facility that is or-
ganized either for profit or not-for-profit and that renders medical care,
treatment or services in accordance with the provisions of the workers
compensation act to an injured employee who is covered thereunder; and

(5) attorneys and other representatives of employers, employees, in-
surers or other entities that are subject to the workers compensation act.

(c) The commissioner of insurance may examine the workers com-
pensation records of insurance companies or self-insurers as necessary to
ensure compliance with the workers compensation act. Each insurance
company providing workers compensation insurance in Kansas, the com-
pany's agents, and those entities that the company has contracted to pro-
vide review services or to monitor services and practices under the work-
ers compensation act shall cooperate with the commissioner of insurance,
and shall make available to the commissioner any records or other nec-
essary information requested by the commissioner. The commissioner of
insurance shall conduct an examination authorized by this subsection in
accordance with the provisions of K.S.A. 40-222 and 40-223 and amend-
ments thereto.

(d) Fraudulent or abusive acts or practices for purposes of the work-
ers compensation act include, but are not limited to, willfully or inten-
tionally:

(1) Collecting from an employee, through a deduction from wages or
a subsequent fee, any premium or other fee paid by the employer to
obtain workers compensation insurance coverage;

(2) misrepresenting to an insurance company or the insurance de-
partment, the classification of employees of an employer, or the location,
number of employees, or true identity of the employer with the intent to
lessen or reduce the premium otherwise chargeable for workers com-
pensation insurance coverage;

(3) lending money to the claimant during the pendency of the work-
ers compensation claim by an attorney representing the claimant, but this
provision shall not prohibit the attorney from assisting the claimant in

Ch. 125             1997 Session Laws of Kansas             637

obtaining financial assistance from another source, except that (A) the
attorney shall not have a financial interest, directly or indirectly, in the
source from which the loan or other financial assistance is secured and
(B) the attorney shall not be personally liable in any way for the credit
extended to the claimant;

(4) obtaining, denying or attempting to obtain or deny payments of
workers compensation benefits for any person by:

(A) Making a false or misleading statement;

(B) misrepresenting or concealing a material fact;

(C) fabricating, altering, concealing or destroying a document; or

(D) conspiring to commit an act specified by clauses (A), (B) or (C)
of this subsection (d)(4);

(5) bringing, prosecuting or defending an action for compensation
under the workers compensation act or requesting initiation of an ad-
ministrative violation proceeding that, in either case, has no basis in fact
or is not warranted by existing law or a good faith argument for the ex-
tension, modification or reversal of existing law;

(6) breaching a provision of an agreement approved by the director;

(7) withholding amounts not authorized by the director from the em-
ployee's or legal beneficiary's weekly compensation payment or from ad-
vances from any such payment;

(8) entering into a settlement or agreement without the knowledge
and consent of the employee or legal beneficiary;

(9) taking a fee or withholding expenses in excess of the amounts
authorized by the director;

(10) refusing or failing to make prompt delivery to the employee or
legal beneficiary of funds belonging to the employee or legal beneficiary
as a result of a settlement, agreement, order or award;

(11) misrepresenting the provisions of the workers compensation act
to an employee, an employer, a health care provider or a legal beneficiary;

(12) instructing employers not to file required documents with the
director;

(13) instructing or encouraging employers to violate the employee's
right to medical benefits under the workers compensation act;

(14) failing to tender promptly full death benefits if a clear and le-
gitimate dispute does not exist as to the liability of the insurance company,
self-insured employer or group-funded self-insurance plan;

(15) failing to confirm medical compensation benefits coverage to any
person or facility providing medical treatment to a claimant if a clear and
legitimate dispute does not exist as to the liability of the insurance carrier,
self-insured employer or group-funded self-insurance plan;

(16) failing to initiate or reinstate compensation when due if a clear
and legitimate dispute does not exist as to the liability of the insurance
company, self-insured employer or group-funded self-insurance plan;

638             1997 Session Laws of Kansas             Ch. 125

(17) misrepresenting the reason for not paying compensation or ter-
minating or reducing the payment of compensation;

(18) refusing to pay compensation as and when the compensation is
due;

(19) refusing to pay any order awarding compensation; and

(20) refusing to timely file required reports or records under the
workers compensation act.

(e) Whenever the director or the commissioner of insurance has rea-
son to believe that any person has engaged or is engaging in any fraud-
ulent or abusive act or practice in connection with the conduct of Kansas
workers compensation insurance, claims, benefits or services in this state,
that such fraudulent or abusive act or practice is not subject to possible
proceedings under K.S.A. 40-2401 through 40-2421 and amendments
thereto by the commissioner of insurance, and that a proceeding by the
director or the commissioner of insurance, in the case of any person
licensed or regulated by the commissioner, with respect thereto would
be in the interest of the public, the director or the commissioner of in-
surance, in the case of any person licensed or regulated by the commis-
sioner, shall issue and serve upon such person a statement of the charges
with respect thereto and shall conduct a hearing thereon in accordance
with the provisions of the Kansas administrative procedure act. Com-
plaints filed with the director or the commissioner of insurance may be
dismissed by the director or the commissioner of insurance on their own
initiative, and shall be dismissed upon the written request of the com-
plainant, if the director or commissioner of insurance has not conducted
a hearing or taken other administrative action dismissing the complaint
within 180 days of the filing of the complaint. Any such dismissal of a
complaint in accordance with this section shall constitute final action by
the director or commissioner of insurance which shall be deemed to ex-
haust all administrative remedies under K.S.A. 44-5,120 and amendments
thereto for the purpose of allowing subsequent filing of the matter in court
by the complainant. Dismissal of a complaint in accordance with this
section shall not be subject to appeal or judicial review.

(f) If, after such hearing, the director or the commissioner of insur-
ance, in the case of any person licensed or regulated by the commissioner,
determines that the person charged has engaged in any fraudulent or
abusive act or practice, any costs incurred as a result of conducting any
administrative hearing authorized under the provisions of this section may
be assessed against the person or persons found to have engaged in such
acts. In an appropriate case to reimburse costs incurred, such costs may
be awarded to a complainant. As used in this subsection, ``costs'' include
witness fees, mileage allowances, any costs associated with reproduction
of documents which become a part of the hearing record and the expense
of making a record of the hearing.

(g) If, after such hearing, the director or the commissioner of insur-

Ch. 125             1997 Session Laws of Kansas             639

ance, in the case of any person licensed or regulated by the commissioner,
determines that the person or persons charged have engaged in a fraud-
ulent or abusive act or practice the director or the commissioner of in-
surance, in the case of any person licensed or regulated by the commis-
sioner, shall issue an order requiring such person to cease and desist from
engaging in such act or practice and, in the exercise of discretion, may
order any one or more of the following:

(1) Payment of a monetary penalty of not more than $1,000 for each
and every act constituting the fraudulent or abusive act or practice, but
not exceeding an aggregate penalty of $2,500 for any six-month period;

(2) redress of the injury by requiring the refund of any premiums
paid by and requiring the payment of any moneys withheld from, any
employee, employer, insurance company or other person or entity ad-
versely affected by the act constituting a fraudulent or abusive act or
practice;

(3) repayment of an amount equal to the total amount that the person
received as benefits or any other payment under the workers compen-
sation act and any amount that the person otherwise benefited as a result
of an act constituting a fraudulent or abusive act or practice, with interest
thereon determined so that such total amount, plus any accrued interest
thereon, bears interest, from the date of the payment of benefits or other
such payment or the date the person was benefited, at the current rate
of interest prescribed by law for judgments under subsection (e)(1) of
K.S.A. 16-204 and amendments thereto per month or fraction of a month
until repayment.

(h) After the expiration of the time allowed for filing a petition for
review of an order issued under this section, if no such petition has been
duly filed within such time, the director at any time, after notice and
opportunity for hearing in accordance with the provisions of the Kansas
administrative procedure act, may reopen and alter, modify or set aside,
in whole or in part, any order issued under this section, whenever in the
director's opinion conditions of fact or of law have so changed as to re-
quire such action or if the public interest so requires.

(i) Upon the order of the director or the commissioner of insurance,
in the case of any person licensed or regulated by the commissioner, after
notice and hearing in accordance with the provisions of the Kansas ad-
ministrative procedure act, any person who violates a cease and desist
order of the director or the commissioner of insurance, in the case of any
person licensed or regulated by the commissioner, issued under this sec-
tion may be subject, at the discretion of the director or the commissioner
of insurance, in the case of any person licensed or regulated by the com-
missioner, to a monetary penalty of not more than $10,000 for each and
every act or violation, but not exceeding an aggregate penalty of $50,000
for any six-month period in addition to any penalty imposed pursuant to
subsection (g).

640             1997 Session Laws of Kansas             Ch. 125

(j) Any civil fine imposed under this section shall be subject to review
in accordance with the act for judicial review and civil enforcement of
agency actions in the district court in Shawnee county.

(k) All moneys received under this section for costs assessed, which
are not awarded to a complainant, or monetary penalties imposed shall
be deposited in the state treasury and credited to the workmen's com-
pensation fee fund.

Sec. 19. K.S.A. 44-5,121 is hereby amended to read as follows: 44-
5,121. (a) Any person who has suffered economic loss by a fraudulent or
abusive act or practice shall have a cause of action against any other person
to recover such loss which was paid as benefits or other amounts of money
which were paid under the workers compensation act and to seek relief
for other monetary damages from such other person based on a fraudu-
lent or abusive act or practice, except that such other monetary damages
shall not include damages for nonpecuniary loss. Relief under this section
is to be predicated upon exhaustion of administrative remedies available
in K.S.A. 44-1,520 and amendments thereto.

(b) Nothing in this section or K.S.A. 44-5,120 and amendments
thereto shall prohibit an employer from exercising a right to reimburse-
ment under K.S.A. 44-534a, 44-556 or 44-569a and amendments thereto.

Sec. 20. K.S.A. 1996 Supp. 44-5,125 is hereby amended to read as
follows: 44-5,125. (a) (1) Any person who obtains or attempts to obtain
any payment of compensation under the workers compensation act for
such person or who denies or attempts to deny the obligation to make
any payment of workers compensation benefits; who obtains or attempts
to obtain a more favorable workers compensation benefit rate or insur-
ance premium rate than that to which such person is otherwise entitled;
who prevents, reduces, avoids or attempts to prevent, reduce or avoid the
payment of any compensation under the workers compensation act; or
who fails to communicate a settlement offer or similar information to a
claimant under the workers compensation act, by, in any such case, know-
ingly or intentionally: (A) Making a false or misleading statement, (B)
misrepresenting or concealing a material fact, or (C) fabricating, altering,
concealing or destroying a document; and (2) any person who conspires
with another person to commit any act described by clause (1) of this
subsection (a), shall be guilty of:

(A) A class A nonperson misdemeanor, if the amount received as a
benefit or other payment under the workers compensation act as a result
of such act or the amount that the person otherwise benefited monetarily
as a result of a violation of this subsection (a) is $500 or less; or

(B) a severity level 9, nonperson felony, if such amount is more than
$500.

(b) Any person who has received any amount of money as a benefit
or other payment under the workers compensation act as a result of a

Ch. 125             1997 Session Laws of Kansas             641

violation of subsection (a) and any person who has otherwise benefited
monetarily as a result of a violation of subsection (a) shall be liable to
repay an amount equal to the amount so received by such person or the
amount by which such person has benefited monetarily, with interest
thereon. Any such amount, plus any accrued interest thereon, shall bear
interest at the current rate of interest prescribed by law for judgments
under subsection (e)(1) of K.S.A. 16-204 and amendments thereto per
month or fraction of a month until repayment of such amount, plus any
accrued interest thereon. The interest shall accrue from the date of over-
payment or erroneous payment of any such amount or the date such
person benefited monetarily.

(c) Any person aggrieved by a violation of subsection (a) shall have a
cause of action against any other person to recover any amounts of money
erroneously paid as benefits or any other amounts of money paid under
the workers compensation act, and to seek relief for other monetary dam-
ages, for which liability has accrued under this section against such other
person. Relief under this subsection is to be predicated upon exhaustion
of administrative remedies available in K.S.A. 44-5,120 and amendments
thereto.

(d) Nothing in this section shall prohibit an employer from exercising
a right to reimbursement under K.S.A. 44-534a, 44-556 or 44-569a and
amendments thereto.

Sec. 21. K.S.A. 74-713 is hereby amended to read as follows: 74-713.
The director shall provide by regulation for the collection of each carrier's,
self-insurer's and group-funded workers' compensation pools' propor-
tionate amount of the carrier's share of expense. The maximum amount
which shall be collected from any carrier, self-insurer or group-funded
workers' compensation pool shall be 3% of the workers' compensation
benefits paid by such carrier, self-insurer or group-funded workers' com-
pensation pool as listed by the director. Such amounts shall be paid within
30 days from the date that notice is served upon such carrier, self-insurer
or group-funded workers' compensation pool. If such amounts are not
paid within such period, the director may assess a civil penalty equal to
10% of the amount so unpaid for each 30 days the liability remains due
and unpaid, and such civil penalty shall be collected at the same time and
as a part of the original amount as determined by the director under the
terms of this act. Upon assessment, if the total dollar amount due is $10
or less, the amount due is waived.

Sec. 22. K.S.A. 44-505, 44-510b, 44-523, 44-534, 44-536, 44-550b,
44-557a, 44-567, 44-5,120, 44-5,121 and 74-713 and K.S.A. 1996 Supp.
44-508, 44-510, 44-532, 44-532b, 44-534a, 44-551, 44-555c, 44-566a and
44-5,125 are hereby repealed.

642             1997 Session Laws of Kansas             Ch. 125

Sec. 23. This act shall take effect and be in force from and after its
publication in the statute book.

Approved April 24, 1997.