Opinion
W.C. No. 4-524-991.
October 6, 2003.
FINAL ORDER
The insurer seeks review of an order of Administrative Law Judge Harr (ALJ) which imposed penalties for an improper termination of temporary disability benefits and violations of Rule of Procedure IX. The insurer contends the penalties were not specifically pled as required by the statute, and that the ALJ improperly imposed multiple penalties for a single "bad action." We affirm the order in part and reverse it in part.
The claimant sustained serious injuries on November 27, 2001, while performing his job as a truck driver. In December 2001 the respondents filed a General Admission of Liability (GAL) for temporary total disability (TTD) benefits commencing December 4, 2001. In May 2002 a treating physician released the claimant to return to work on a part-time basis. The claimant underwent a driving test and returned to part-time work with the employer on July 16, 2002.
On July 10, 2002, the insurer unilaterally reduced the claimant's TTD benefits by approximately fifty percent. The insurer did not file an admission of liability or any documentation in support of this action.
On September 9, 2002, a treating physician released the claimant to full-time work, and the claimant returned to full-time work on September 9. On September 17, 2002, the insurer stopped all payment of temporary disability payments. However, it filed no admission of liability or documentation in support of this action.
On October 3, 2002, the claimant filed an application for hearing listing the issues as TTD benefits commencing November 27, 2001, temporary partial disability (TPD) benefits, and penalties. The application described the penalty issues as follows:
Failure to follow statute and Rules in terminating Claimant's temporary disability benefits; Rule IX(C); Rule XI(H); § 8-42-105; § 8-43-304; § 8-43-305
Following the filing of the application for hearing, the insurer filed a GAL on October 23, 2002. The GAL admitted liability for TTD through July 15, 2002, and TPD commencing July 16, 2002. On November 11, 2002, the respondents filed another GAL which terminated TPD benefits effective September 8, 2002. Attached to the November 11 GAL was a medical report from the treating physician releasing the claimant to return to work on September 9.
Based on this evidence, the ALJ imposed three penalties under § 8-43-304(1), C.R.S. 2002. First, the ALJ found the insurer knew or reasonably should have known that it "improperly withheld" the claimant's TTD benefits from July 10 through July 15, 2002. Apparently, the ALJ found this conduct violated § 8-43-203(2)(d), C.R.S. 2002, which provides that "if any liability is admitted, payments shall continue according to admitted liability." The ALJ concluded this violation ceased after 62 days because of an overpayment of TPD benefits. Consequently, the ALJ imposed penalties of $60 per day for a total of $3,720.
Next, the ALJ found the insurer violated Rule of Procedure IX (C)(1)(c), 7 Code Colo. Reg. 1101-3 at 34, because it unilaterally terminated the claimant's TTD benefits on July 10 without filing the requisite GAL and accompanying documentation, and without admitting for ongoing TPD benefits. The ALJ imposed penalties of $75 per day from July 10 through October 23, for a total of $7,500.
Finally, the ALJ found the insurer violated Rule IX (C)(1)(b) on September 9, 2002, when it unilaterally terminated the claimant's TPD benefits without filing an admission of liability together with a statement of the primary care physician releasing the claimant to regular employment. This violation continued until the filing of the November 11 GAL. Consequently, the ALJ imposed penalties of $75 per day for a total of $4,875.
I.
On review, the insurer first contends that the grounds for imposition of the penalties were not sufficiently pled as required by § 8-43-304(4), C.R.S. 2002, and that the insurer was denied due process because it was not sufficiently notified of the grounds for claiming penalties. In support, the insurer argues the claimant's application for hearing does not mention § 8-43-203(2)(d). The insurer further argues that the request for Rule IX penalties was not sufficiently definite because the specific dates of the penalties were not identified and the claimant did not mention termination of TPD benefits.
Section 8-43-304(4) provides that an application for penalties under § 8-43-304(1) "shall state with specificity the grounds on which the penalty is being asserted." We have previously determined that the requirement for specificity serves two functions. First, it notifies the putative violator of the basis of the claim so that violator may exercise its right to cure the violation. Further, the specificity requirement insures the violator will receive notice of the legal and factual bases for the penalty claim so that the violator's rights to present evidence, confront adverse evidence, and present argument in support of its position are protected. See Major Medical Insurance Fund v. Industrial Claim Appeals Office, ___ P.3d ___ (Colo.App. No. 02CA1846, July 31, 2003) (when adjudication turns on questions of fact parties are entitled to notice of evidence to be considered and afforded reasonable opportunity to confront adverse evidence, present evidence, and make argument); Gonzales v. Denver Public School District No. 1, W.C. No. 4-437-328 (December 27, 2001) (ALJ properly denied penalties against employer for violation of Rule XI (B)(3) where response to application did not indicate claimant was seeking penalties against the employer); cf. Shaw v. Valdez, 819 F.2d 965 (10th Cir. 1987) (in unemployment insurance case parties entitled to notice of factual and legal issues to be adjudicated at hearing).
Here, the claimant's application for hearing did not request the imposition of penalties for a violation of § 8-43-203(2)(d), despite instructions on the application that parties should identify the "rule or section of the statute allegedly violated." Instead, the application cites Rule IX and other provisions of the statute and rules as grounds for the imposition of penalties. Moreover, the first indication that the claimant was seeking penalties for violation of § 8-43-203(2)(d) came when the claimant submitted a Position Statement at the commencement of the hearing. ( See Claimant's Position Statement at pp. 4-5.) However, the discussion of the issues at the commencement of the hearing focused on potential violations of Rule IX, and it is not clear the insurer's counsel recognized any claim was being made under § 8-43-203(2)(d). When, at the conclusion of the hearing, claimant's counsel explicitly argued for separate penalties based on termination of benefits and the alleged violations of Rule IX, the insurer's counsel objected that the penalties were not sufficiently specified in the application. (Tr. pp. 13-14).
Under these circumstances we agree with the insurer that the issue of penalties under § 8-43-203(2)(d) was not sufficiently pled to comply with the requirements of § 8-43-304(4). In our opinion, the insurer was not provided sufficient notice of the claimant's intention to seek separate penalties for violation of the statute and two violations of Rule IX. Had there been sufficient notice the insurer may well have been in position to present evidence and make argument that the alleged violation of § 8-43-203(2)(d) and the first violation of Rule IX constituted the same misconduct and are not separately punishable. Further, the insurer could have been in a better position to argue that even if its actions are separately punishable, the two instances of misconduct are so closely related in law and fact that only a nominal penalty should be imposed for one of the violations. Thus, we set aside the $3,700 in penalties imposed for the alleged violation of § 8-43-203(2)(d).
Insofar as the claimant argues the Rule IX penalties were not sufficiently pled, we disagree. There is no requirement that the party requesting penalties specify the exact dates of the penalties so long as the alleged violator is given sufficient information to attempt a cure and defend itself. Here, even a cursory reading of Rule IX would have alerted the insurer that its undocumented termination of TTD benefits in July 2002 constituted a potential violation of Rule IX (C)(1)(c). Indeed, the respondents attempted to cure this violation by filing the October 23 GAL, as they themselves admitted. (Tr. Pp. 15-16). Similarly, a cursory reading of Rule IX would have suggested that the undocumented termination of all benefits based on the claimant's September 9 return to full-time work constituted a violation of Rule IX (C)(1)(b). To the extent the insurer was unsure of the precise nature of the claimant's allegations, discovery was available. Cf. Varela v. Cedaredge Mercantile, W.C. No. 4-471-768 (July 18, 2003) (application for hearing requesting penalties for violation of Rule IX "without filing petition to suspend" gave sufficient notice of claim for penalties based on specific provisions of Rule IX (C)(1)(a)).
II.
The insurer next contends that it has been penalized multiple times for a single "bad action." The insurer argues the multiple penalties are improper because after one penalty has been imposed for the alleged misconduct, § 8-43-304(1) prohibits the imposition of additional penalties. We find no error.
Because we have set aside the penalty for violation of § 8-43-203(2)(d), the insurer's argument is moot insofar as concerns multiple penalties for violation of the statute and the corresponding rules. Hence, we need only consider whether the ALJ properly assessed penalties for the two violations of Rule IX.
Penalties may be imposed for violation of a rule of procedure adopted by the Director of the Division of Workers' Compensation for enforcement of the Workers' Compensation Act. Human Resource Co. v. Industrial Claim Appeals Office, 984 P.2d 1194 (Colo.App. 1999). Further, the violation of a rule of procedure constitutes the violation of an "order" for purposes of § 8-43-304(1). Section 8-40-201(15), C.R.S. 2002 (defining order to include rule or regulation); Jimenez v. Industrial Claim Appeals Office, ___ P.3d ___ (Colo.App. No. 02CA2283, September 11, 2003); Spracklin v. Industrial Claim Appeals Office, 66 P.3d 176 (Colo.App. 2002). Because a rule of procedure equates to an "order," violation of a rule may be penalized under § 8-43-304(1) regardless of whether the statute also imposes a specific penalty for the action in question. Holliday v. Bestop, Inc., 23 P.3d 700 (Colo. 2001); Giddings v. Industrial Claim Appeals Office, 39 P.3d 1211 (Colo.App. 2001).
The insurer's argument notwithstanding, we conclude the record supports the ALJ's determination that there were two violations of the Act subject to separate penalties. Rule IX (C)(1) concerns the termination of "temporary disability benefits without a hearing by the filing of an admission of liability." As the ALJ recognized, Rule IX constitutes an exception to the rule that when the respondents have admitted liability for temporary disability benefits, they may not terminate such benefits without obtaining a hearing to establish the factual and legal predicates for termination. Section 8-43-203(2)(d); Colorado Compensation Insurance Authority v. Industrial Claim Appeals Office, 18 P.3d 790 (Colo.App. 2000).
Here, one "termination" of temporary disability benefits occurred in July 2002 when the insurer unilaterally reduced the TTD payments by half, effectively commencing the payment of TPD benefits. Apparently, this reduction was motivated by the claimant's anticipated return to work. (Finding of Fact 21). However, the reduction of TTD benefits could not be effected legally without filing an admission together with a wage report and an admission for TPD "if any," as required by Rule IX (C)(1)(c). Here, the ALJ noted the employer provided the insurer with a wage report on July 25 which showed the claimant was working part-time. Yet, the insurer failed to file the admission and documentation required by the rule.
A second termination of temporary disability benefits occurred on September 9 when the insurer unilaterally terminated all temporary disability payments to the claimant. This termination was apparently the result of the claimant's release to regular full-time work, as shown by the November 11 GAL. (Finding of Fact 22). However, Rule IX (C)(1)(a) requires that termination of temporary disability benefits based on a release to regular employment be documented by an admission of liability accompanied by a medical report from the treating physician. Here, no such documentation was filed until November 11.
Thus, the record fully supports the ALJ's conclusion that there were two independent violations of Rule IX involving different sections of the rule, each of which required different conduct of the insurer. The fact that the insurer had violated Rule IX (C)(1)(c) by improperly reducing the claimant's TTD benefits in July cannot serve as an excuse for violating Rule IX (C)(1)(b) when the insurer decided to cease all payment of temporary disability benefits in September. Cf. Human Resource Co. v. Industrial Claim Appeals Office, supra (respondents' compliance with rule for filing admission concerning scheduled impairment did not excuse failure to comply with rule governing whole person impairment when respondents subsequently received impairment rating triggering the whole person rule).
Insofar as the insurer makes other arguments, we find them unpersuasive.
IT IS THEREFORE ORDERED that the ALJ's order dated January 28, 2003, is reversed insofar as it imposed a penalty of $3,700 for violation of § 8-43-203(2)(d).
IT IS FURTHER ORDERED that the ALJ's order is otherwise affirmed.
INDUSTRIAL CLAIM APPEALS PANEL
______________________________ David Cain
______________________________ Bill Whitacre
NOTICE
This Order is final unless an action to modify or vacate this Order is commenced in the Colorado Court of Appeals, 2 East 14th Avenue, Denver, Colorado 80203, by filing a Petition to Review with the Court, within twenty (20) days after the date this Order was mailed, pursuant to § 8-43-301(10) and § 8-43-307, C.R.S. 2002. The appealing party must serve a copy of the Petition upon all other parties, including the Industrial Claim Appeals Office, which may be served by mail at 1515 Arapahoe, Tower 3, Suite 350, Denver, CO 80202.
Copies of this order were mailed to the parties at the addresses shown below on October 6, 2003 by A. Hurtado.
Norman E. Jakel, 1139 31st Ave., Greeley, CO 80634
Northern Colorado Paper, Inc., 295 71st Ave., Greeley, CO 80634
Allen Hecker, Employers Insurance Company of Wausau, P.O. Box 419157, Kansas City, MO 64141-6157
Kathleen Pennucci, Subsequent Injury Fund, Tower 2, #630, Division of Workers' Compensation — Interagency Mail Katherine E. Allen, Esq., 705 14th St., Greeley, CO 80631 (For Claimant)
Alanna R. Pozzi, Esq., 1120 Lincoln St., #1606, Denver, CO 80203 (For Respondents)