Opinion
W.C. No. 3-771-625
August 8, 1995
FINAL ORDER
The respondents seek review of an order of Administrative Law Judge Barringer (ALJ) which required the Colorado Compensation Insurance Authority (CCIA) to pay a penalty for its failure timely to pay permanent total disability benefits. We affirm.
On April 30, 1991, the respondents filed a Final Admission of Liability admitting liability for permanent total disability benefits at a rate of $105.33 per week. The respondents concede that a payment of permanent total disability benefits in December 1992 was one week late. The CCIA' adjuster, Ms. Scott, testified that she did not know the reason for the late payment, but that, "[I]t may have fallen off the Auto-Pay System in the Computer." Tr. pp. 22, 23. Ms. Scott also stated that the payment was made as soon as it was brought to CCIA's attention. Tr. p. 23.
The ALJ found that:
"Claimant has very limited income as a result of her permanent total disability that flows from this compensable injury. Respondents are required by law to pay her every 28 days. It was demonstrated during the course of hearing, that there was one period during which payments were made at least 7 days late, and the Administrative Law Judge finds in light of the minimal amount of benefits that are being paid to Claimant and the importance of payment of those benefits on time and in timely manner to Claimant the maximum penalty allowable by law should be imposed for 7 days."
Therefore, pursuant to former § 8-53-116 C.R.S. (1986 Repl. Vol. 3B) [currently codified with changes at § 8-43-304(1), C.R.S. (1994 Cum. Supp.)], the ALJ ordered the CCIA to pay a penalty of $700 based upon a rate of $100 per day.
I.
The respondents contend that the ALJ's penalty assessment is not supported by the applicable law. We disagree.
Former § 8-53-116 provides that an insurer:
"who violates any provision of articles 40 to 54 of this title, or does any act prohibited thereby, or fails or refuses to perform any duty lawfully enjoined within the time prescribed by the director or panel for which no penalty has been specifically provided, or fails or refuses to obey any lawful order . . . . shall be punished by a fine of not more than one hundred dollars for each such offense."
In Colorado Compensation Insurance Authority v. Industrial Claim Appeals Office, 907 P.2d 676 (Colo.App. 1995), the court rejected the notion that former § 8-53-116 requires the claimant to prove that an insurer acted recklessly or intentionally. Rather, the court held that an insurer's liability for penalties under § 8-53-116 is governed by a "negligence" standard, and concluded that "penalties may be assessed against an insurer that neglects to take the action a reasonable insurer would take to comply with a lawful order."
Moreover, as the respondents argue, we have held that an insurer's adjustment of a claim is not unreasonable under an objective standard if predicated on a "rational argument based on law or evidence." See Tozer v. Scott Wetzel Services, Inc., 883 P.2d 496 (Colo.App. 1994); Brown v. Gosney and Sons, Inc., W.C. No. 3-104-140, August 30, 1994. Thus, we have held that an insurer is not liable for penalties if its failure to provide benefits is predicated upon a rational legal argument or rational argument based in fact. Brown v. Gosney and Sons, Inc., supra; Toth v. Pueblo School District No. 70, W.C. No. 3-878-236, 3-793-718, January 13, 1995.
Former § 8-51-101 C.R.S. (1986 Repl. Vol. 3B) [codified with changes at § 8-42-103 C.R.S. (1994 Cum. Supp.)], which is applicable here, states that disability indemnity benefits shall be paid regularly "but not less frequently than once every two weeks, unless otherwise ordered by the director." The "director" had not ordered a different payment schedule with respect to the claimant's permanent total disability benefits. Consequently, the respondents had a statutory duty to pay the permanent disability benefits every two weeks.
However, Ms. Scott testified that the claimant's permanent total disability benefits were normally paid every 28 days and the claimant apparently did not object to this arrangement. Tr. p. 22. The respondents also do not dispute that the December 1992 payment "late" under the 28 day payment schedule. Accordingly, we understand the respondents to concede that the CCIA's December 1992 payment of permanent total disability benefits violated § 8-51-101. Consequently, we agree with the respondents that the pertinent issue is whether the CCIA's failure timely to pay the benefits was predicated on a rational argument based in law or fact.
The respondents argue that Ms. Scott's testimony compels a determination that the CCIA had a good faith basis for its failure to timely pay benefits. We disagree.
On appeal the respondents admit that the reason for the late disability payment "is not known." Because, their admission asserts no explanation for the late payment, we cannot say that the CCIA's actions were based upon a rational argument.
Further, the respondents did not present any evidence concerning the nature of the "computer error" which Ms. Scott stated "may" have caused the delay in payment. Therefore, the record does not contain evidence from which the ALJ could determine whether the "computer error" was due to the CCIA's negligence or some other factor outside its control. Under these circumstances, we agree with the ALJ that Ms. Scott's suggestion that the late payment "may" have been the result of a "computer error" is, in and of itself, "insufficient" to establish a rational argument. Tr. p. 39; CAN-USA Construction, Inc. v. Gerber, 767 P.2d 765 (Colo.App. 1988) rev'd on other grounds at 783 P.2d 269 (1989) (ALJ's oral findings are properly considered to interpret the written findings).
II.
The CCIA also contends that former § 8-53-116 is unconstitutional on its face, and as applied. Specifically, the CCIA argues that the statute denies due process of law, and results in the imposition of "excessive" fines. However, the respondents recognize that we lack jurisdiction to consider their "facial" challenge to the constitutionality of § 8-43-304(1). Kinterknecht v. Industrial Commission, 175 Colo. 60, 485 P.2d 721 (1971); Celebrity Custom Builders v. Industrial Claim Appeals Office, ___ P.2d ___ (Colo.App. No. 94CA1937, June 15, 1995).
With regard to the respondents' "as applied" challenge to the statute, the Supreme Court has indicated that administrative agencies have the authority to determine whether "an otherwise constitutional statute has been unconstitutionally applied." Horrell v. Department of Administration, 861 P.2d 1194, 1196 (Colo. 1993). Furthermore, we previously rejected a similar "as applied" argument by the CCIA. See Hrabczuk v. Industrial Commission, W.C. No. 3-993-396, September 29, 1993 and Toth v. Pueblo School District No. 70, W.C. Nos. 3-878-236, 3-793-718, January 13, 1995.
However, in Selvage v. Colorado Department of Highways, W.C. No. 3-632-483, July 28, 1995, we concluded that the CCIA's "facial" and "as applied" challenges to the penalty statutes are so intertwined that we cannot consider the "as applied" challenge without addressing the "facial" constitutionality of the statute. We further stated that "to do so would violate the principle of separation of powers, and cause us to engage in constitutional decision-making beyond our area of expertise." See Denver Center for Performing Arts v. Briggs, 696 P.2d 299, 305 (Colo. 1985) (administrative rulings concerning "facial" challenges to statutes will not be considered "authoritative" on judicial review). Therefore, we declined to consider the "as applied" challenge in Selvage.
We adhere to our conclusion in Selvage. Consequently, we decline to consider the respondents' "as applied" challenge to the constitutionality of § 8-43-304(1). Insofar as this result is inconsistent with Hrabczuk and Toth, we have reconsidered the matter.
IT IS THEREFORE ORDERED that the ALJ's order dated April 20, 1993, is affirmed.
INDUSTRIAL CLAIM APPEALS PANEL
____________________________________ David Cain
____________________________________ Kathy E. DeanNOTICE
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, CO 80203, by filing a petition for review with the court, with service of a copy of the petition upon the Industrial Claim Appeals Office and all other parties, within twenty (20) days after the date this Order is mailed, pursuant to section 8-43-301(10) and 307, C.R.S. (1994 Cum. Supp.).
Copies of this decision were mailed August 8, 1995 to the following parties:
Epifina Martinez, 1906 E. 16th, Pueblo, CO 81001
Candy's Tortilla Factory, Inc., 2110 Santa Fe Dr., Pueblo, CO 81006-1460
Colorado Compensation Insurance Authority, Attn: C. Boyd, Esq., — Interagency Mail
Ralph Ogden Esq., 1120 Lincoln St., Suite 1306, Denver, CO 80203
(For the claimant)
Steven U. Mullens, Esq., 90 South Cascade St., Ste. 300, Colorado Springs, CO 80903
(For the Claimant)
BY: _______________________