Opinion
W.C. Nos. 4-734-913 4-734-795.
March 23, 2009.
ORDER OF REMAND
The respondent insurer seeks review of an order of Administrative Law Judge Jones (ALJ) dated July 7, 2008, that ordered the insurer to pay benefits to the claimants. We set the order aside and remand for entry of a new order.
The respondent insurer and the claimants proceeded to hearing in this matter and stipulated between themselves that the claimants sustained compensable injuries and were entitled to temporary total disability (TTD) benefits. They also stipulated that the claimants received reasonable, necessary, and authorized medical care from a provider. The ALJ made corresponding findings of fact. She concluded that the claimants were entitled to specific medical benefits and TTD benefits. In addition, the ALJ determined that the respondent employer was liable for several penalties.
The ALJ also found that the respondent employer had proper notice of the hearing, but failed to appear. The insurer and the claimant proceeded to litigate the question of whether the insurer had effectively cancelled the employer's insurance prior to the dates of the claimants' injuries. The claimants sustained compensable injuries on August 31 and September 6, 2006. The employer purchased a policy of workers' compensation insurance from the insurer for coverage from October 29, 2005 through November 1, 2006. The insurer billed the employer monthly for estimated premiums. The ALJ acknowledged the insurer's assertion that it sent a notice of cancellation to the employer on February 2, 2006 by certified mail. However, the ALJ concluded that the insurer failed to provide proper notice of cancellation to the employer and held it liable to pay benefits to the claimants. The ALJ reserved undecided matter for future determination.
The Workers' Compensation Act, §§ 8-40-101 to 8-47-209, C.R.S. 2008, requires an insurer to notify an employer when it cancels coverage:
Every insurance carrier authorized to transact business in this state, including Pinnacol Assurance, which insures employers against liability for compensation under the provisions of articles 40 to 47 of this title, shall notify any employer insured by . . . Pinnacol Assurance . . . by certified mail of any cancellation of such employer's insurance coverage. Such notice shall be sent at least thirty days prior to the effective date of the cancellation of the insurance. However, if the cancellation is based on one or more of the following reasons, then such notice may be sent less than thirty days prior to the effective date of the cancellation . . .: nonpayment of premium. . . .
Section 8-44-110 C.R.S. 2008. We have construed this provision to afford the insured advance notice of an impending cancellation of insurance so that the insured has an opportunity to avoid non-insured status. Davidovich v. Team Builders, Inc., W.C. No. 4-468-801 (October 5, 2001).
The insurer asserts on appeal that the ALJ erred in determining that it failed to establish that it had effectively cancelled the employer's insurance coverage. The insurer does not dispute the ALJ's conclusion that it needed to establish that it either mailed notice of cancellation by certified mail in accordance with the statute or showed that the employer had actual notice of the cancellation. Instead, the insurer contends that it was entitled to a rebuttable presumption that it sent the employer a notice of cancellation by certified mail. The insurer further asserts that it presented evidence to support a finding that, in any event, the employer had actual notice that its insurance coverage was cancelled.
It appears from our review of the ALJ's order that the ALJ may have considered the insurer's evidence too narrowly in determining whether it properly notified the employer that its policy was being cancelled. We therefore conclude that the matter must be remanded to the ALJ in order to consider whether the insurer's evidence persuades the ALJ that the insurer demonstrated that its actions in attempting to cancel coverage complied with § 8-44-110. See § 8-43-301(8), C.R.S. 2008 (Panel may remand if conflicts in evidence not resolved in record).
As noted by the ALJ, "[t]he existence of a business practice custom is sufficient to warrant a presumption that notice was sent, and it is the province of the trier of fact to decide whether that presumption is overcome by other evidence." EZ Building Components Mfg., LLC v. Industrial Claim Appeals Office, 74 P.3d 516, 519 (Colo.App. 2003), citing National Motors, Inc. v. Newman, 29 Colo. App. 280, 484 P.2d 125 (1971). The ALJ made the following findings of fact regarding the testimony of witnesses on behalf of the insurer concerning its efforts to establish that it had mailed a notice of cancellation to the employer by certified mail as required by the applicable statute. The underwriter who testified about procedures for notifying policyholders of cancellations never worked on the file at issue or had personal knowledge about it. The insurer's mailroom leader testified about policies and procedures used to ensure that documents and notices mailed by the insurer were sent in conformance with the statute. However, the mailroom leader was unable to locate or obtain a return receipt to evidence that the cancellation letter was sent and then actually received by the employer. A claims adjustor testified about the insurer's attempt to determine the status of the employer's policy after being notified of the claims in this matter. The insurer was not able to produce a return receipt establishing mailing and actual receipt by the employer of the notice of cancellation. Maintaining a return receipt is the insurer's normal business practice concerning the cancellation of policies.
The ALJ concluded that the insurer had failed to effectively cancel its policy under the circumstances. In making her determination, the ALJ noted that the insurer presented "no evidence" "to establish that they followed proper United States Postal Service procedure in attempting to obtain the return receipt. The insurer objects to the ALJ referencing a postal manual on the ground that postal procedures were never discussed or admitted into evidence. However, the insurer's mail leader testified about tracking delivery of certified mail through the postal website and having the ability to subsequently obtain a signature for a certain amount of time. She admitted that the insurer did not obtain a verification and signature in the present case. Tr. at 126-27.
The insurer also objects to the ALJ's reference to Rule 4(h) of the Colorado Rules of Procedure, regarding proof of service of process. In discussing the lack of evidence to document the actual mailing or receipt of the cancellation notice to the employer, the ALJ referred to the provision in C.R.C.P. 4(h) requiring an affidavit with the return receipt attached to establish service by mail "where required." We construe the ALJ's reference to this manner of proving service by mail merely as reiterating the general importance of the return receipt in establishing that a document was actually received by certified mail.
However, the insurer also takes issue with the ALJ's references in the same paragraph of her conclusions of law to there being "no evidence" that the cancellation notice was actually mailed to or received by the employer. Findings of Fact, Conclusions of Law, and Order (Order) at 12, ¶ 28. The importance assigned to the lack of an actual return receipt from the employer is apparent from a review of the ALJ's order. It is conceivable that the ALJ was referring to the lack of testimony describing the actual, physical mailing of the notice, as well as the lack of a return receipt signed on behalf of the employer and indicating actual receipt of the notice. However, the insurer presented circumstantial evidence that, if credited by the ALJ, may sustain a finding that the insurer mailed the notice of cancellation to the employer by certified mail and, also, that the employer actually knew that its policy had been cancelled. See Arenas v. Industrial Claim Appeals Office, 8 P.3d 558, 561 (Colo.App. 2000) (ALJ's factual resolutions upheld if supported by substantial evidence and plausible inferences from circumstantial evidence).
The ALJ recognized that the provisions of § 8-44-110 could be substantially complied with by a showing that the employer had actual notice of the cancellation and expressly considered, but rejected, certain evidence tendered by the insurer to establish that the employer had actual notice of its policy's cancellation. The insurer submitted an exhibit, marked M. The ALJ was not required to refer to disputed evidence before rejecting it as unpersuasive. Jefferson County Public Schools v. Dragoo, 765 P.2d 636 (Colo.App. 1988). Nonetheless, in her findings of fact, the ALJ found that the exhibit "does not establish that the Insurer had actual notice of the cancellation of their workers' compensation policy prior to the Claimants' dates of injury." Order at 8, ¶ 30. It appears that the reference to the insurer having actual notice of cancellation is a mere typographical error, and that the ALJ intended to refer to the respondent employer. We note that exhibit M included what appears to be an email from someone reputed to be the controller of the employer, stating that the insurer was not the carrier at the time of the claim or claims at issue.
The ALJ's reference in her conclusions of law to "no evidence" to document the employer's actual receipt of the notice of cancellation cannot be disregarded in light of the ALJ's discussion in her findings of fact of some of the employer's evidence tendered to establish such actual notice. See Hall v. Industrial Claim Appeals Office, 757 P.2d 1132 (Colo.App. 1988) (finding of "no evidence" cannot be equated with finding of "no credible evidence"). We therefore conclude that it is necessary for the ALJ to clarify whether the employer's evidence presented to establish the employer's actual receipt of the notice of cancellation was sufficiently persuasive.
The ALJ stated that the mandate of § 8-44-110 is intended to provide "actual notice of cancellation" to the employer/policyholder and that "certified mailing alone does not satisfy the basic policy interests of the Workers' Compensation Act of Colorado." The ALJ further concluded that without actual notice, the requirements of the statute are not satisfied. Order at 13, ¶ 31. On appeal, the claimants make the corresponding argument that actual receipt by the policy holder of notice of cancellation is required under § 8-44-110.
Contrary to the claimants' contention and, perhaps, the ALJ's reading of the statute, in our view § 8-40-101 does not compel in all circumstances the production by the insurer of a completed return receipt or, for that matter, evidence of actual notice. As recognized by the court of appeals in EZ Building Components Mfg., LLC, actual notice that a policy is cancelled may obviate the need to use certified mail under § 8-44-110. EZ Building Components Mfg., LLC, 74 P.3d at 518. However, § 8-44-110 has not been construed to impose the additional requirement that an employer be established in every instance to have actual notice of the cancellation of its insurance coverage.
Because the best indicator of legislative intent is the language of the statute, words and phrases in a statute should be given their plain and ordinary meanings, and phrases should be read in context and construed according to the rules of grammar and common usage. Weld County School District RE-12 v. Bymer, 955 P.2d 550 (Colo. 1998). However, statutory language should not be construed in a manner which produces an absurd result. Humane Society of the Pikes Peak Region v. Industrial Claim Appeals Office, 26 P.3d 546 (Colo.App. 2001).
Here, the legislature specifically provided in § 8-40-101 that the insurer must notify the employer by certified mail of any cancellation of such employer's insurance coverage. The legislature could have required actual proof of service on the employer but did not do so. See, e.g., Morgan v. Reser, 162 Colo. 165, 166-67, 425 P.2d 42, 43 (1967) (statute required proof of receipt by certified mail before contempt available for nonpayment of support). The legislature elected not to require a method of providing absolute certainty that notice was given. Instead, it only required notice by certified mail, a method reasonably calculated to effect notice.
The distinction between actual notice and sufficient notice by certified mail has been recognized by Colorado courts. See Ault v. Department of Revenue 697 P.2d 24 (Colo. 1985) (actual notice of driver's license revocation hearing was not required by statute or due process clause; notice by certified mail sufficient). Even in light of the serious constitutional issues created by the use of presumptions in criminal cases, courts generally authorize a trier of fact to draw a permissive inference that notice was received when the notice was sent by certified mail, return receipt requested. See Jolly v. People 742 P.2d 891 (Colo., 1987) (unclaimed drivers revocation was sent to the defendant's last known address, by certified mail, return receipt). Moreover, evidence of a return receipt may provide prima facie proof, rather than a conclusive presumption, of notice. See People v. Lesh, 668 P.2d 1362, 1365 (Colo. 1983) (proof of knowledge of revocation order required in driving after judgment prohibited case where revocation notice sent by certified mail). See also, Kuhndog, Inc. v. Industrial Claim Appeals Office, No. 08CA1926, slip op. at 3, ___ P.3d ___ (Colo.App. March 19, 1009) (service by mail reasonably calculated to effect required notice); Schmidt v. Langel, 874 P.2d 447, 451 (Colo.App. 1993) (due process does not require that method of providing notice be absolutely certain to effect notice in every instance; it only requires that method be reasonably calculated to effect notice).
Generally, the question of whether notice was mailed is a question of fact. See Campbell v. IBM Corp., 867 P.2d 77 (Colo.App. 1993). However, here it may be that the ALJ assumed that there had to be proof of actual receipt by the employer of the notice of cancelation and therefore we can not ascertain whether the ALJ resolved the factual issue of whether the proof of a business practice or custom was sufficient to support a finding that a notice was properly sent by certified mail.
Under Olsen v. Davidson, 142 Colo. 205, 350 P.2d 338 (1960), a presumption of receipt by regular mail arises when the notice contains the proper postage and the proper address. Where, as here, notice is sent by certified mail, as expressly authorized by statute, a showing of certification substitutes for a showing of proper postage. See Ford v. Genereux, 104 Colo. 17, 87 P.2d 749 (1939); Johnson-Voiland-Archuleta, Inc. v. Roark Associates 43 Colo. App. 370, 608 P.2d 818 (Colo.App. 1979). A return receipt showing delivery to the named addressee, which has been properly postmarked by the postal service in the regular manner, supplants a showing of a proper address on the mailed document. See Johnson-Voiland-Archuleta, Inc. v. Roark Associates supra. Therefore, a remand is necessary for the ALJ to make factual findings on whether the notice was properly sent by certified mail.
The insurer further asserts that the ALJ erred in concluding that it was required to provide at least 30 days prior notice of the cancellation because the employer paid estimated premiums. The ALJ cited Victory v. Dels Masonry, Inc., W.C. No. 4-309-177 (September 8, 1999) as support for the contention that payments based on estimated premiums, rather than actual premiums, required 30 days notice of cancellation. In that case, the ALJ had made alternate conclusions of law, one of which was that nonpayment of estimated premiums did not constitute nonpayment of premiums for purposes of the cancellation statute. However, the Panel disposed of the appeal on an alternate basis regarding estoppel and, therefore, did not reach the issue of cancellation based on estimated premiums. We reject the contention that a cancellation based on the nonpayment of an estimated premium requires 30 days notice under the statute. Payment of estimated premiums for workers' compensation coverage does not appear to be unusual. See, e.g., Curry v. Industrial Comm'n, 672 P.2d 513, 514 (Colo. 1983) (addressing policy providing for estimated premiums and, upon termination, computation of earned premiums); Travelers Indemnity Co. v. Howard Electric Co., 879 P.2d 431, 433 (Colo.App. 1994) (discussing retrospective premiums covering workers' compensation based on estimated premiums subsequently adjusted to reflect actual loss experience); State Compensation Insurance Fund v. Wangerin, 736 P.2d 1246, 1247 (Colo.App. 1986) (contrasting actual earned premium and previously paid estimated premium requiring insured to pay excess). We therefore disapprove of the ALJ's alternative basis for her determination that the insurer failed to effectively cancel the employer's insurance coverage.
Because it may come up on remand we note the following regarding any imposition of penalties against the employer under § 8-43-203(1), C.R.S. 2008 for failure to admit or deny. In our view, § 8-43-203(2)(a) does not allow the imposition of penalties against an insured employer. Section 8-43-203(1), C.R.S. 2008, provides that the employer or, if insured, the employer's insurance carrier must notify the Division of Workers' Compensation within 20 days of knowledge of a disabling injury or an injury which results in permanent impairment. Section 8-43-203(2)(a) provides that if the notice required by § 8-43-203(1) is not timely filed, "the employer or if insured, the employer's insurance carrier may become liable to the claimant, if the claimant is successful on the claim for compensation, for up to one day's compensation for each day's failure to so notify." (Emphasis added).
If, on remand, the ALJ determines that the employer was insured at the relevant time, then the employer would be relieved of any responsibility to admit or deny liability under § 8-43-203(1). See U.S. Fidelity Guaranty, Inc. v. Kourlis, 868 P.2d 1158 (Colo.App. 1994); Campion v. Barta Builders, 780 P.2d 23 (Colo.App. 1989) (insured employers may not be penalized for failure to admit or deny); Smedley v. Calcomp/Acess, W. C. No. 4-210-382 (October 3, 1995).
The respondents argue that on the issue of TTD benefits with reference to the claimant Perez the ALJ's order may be interpreted as ordering the insurer to pay TTD benefits beyond the period that the parties had agreed to in a stipulation presented to the ALJ at the inception of the hearing. The claimant in his brief has chosen not to respond to this contention.
The ALJ found that the parties had stipulated that the claimant Perez was eligible for TTD benefits for the period of September 6, 2006 through March 1, 2007, which is subject to offset as the employer continued to pay his regular wages during that time period. However, the ALJ then in her conclusions of law determined that the claimant Perez was entitled to TTD benefits from January 1, 2008 until terminated by statute or law. Order at 10, ¶ 14. The ALJ then ordered that all issues other than coverage had been resolved by stipulations of the parties. Order at 13, ¶ 2. We cannot discern whether the ALJ has determined that the claimant Perez is entitled to TTD benefits beyond the stipulation or not and therefore remand for clarification of this issue.
IT IS THEREFORE ORDERED that the ALJ's order dated July 7, 2008, is set aside, and the matter is remanded for further proceedings and entry of a new order consistent with the views expressed herein.
INDUSTRIAL CLAIM APPEALS PANEL
_______________________________ John D. Baird
_______________________________ Thomas Schrant
RUBEN PEREZ, WINDSOR, CO, (Claimant) LAGS EXPLORATION DBA WATERBOYZ INT'L, LLC, FORT MYERS, FL, (Employer) PINNACOL ASSURANCE, Attn: HARVEY D FLEWELLING, ESQ., DENVER, CO, (Insurer) RING ASSOCIATES, PC, Attn: JESS M PEREZ, ESQ., FORT COLLINS, CO, (For Claimant).
RITSEMA LYON — FORT COLLINS, Attn: DOUGLAS STRATTON, ESQ., FORT COLLINS, CO, (For Respondents) RING ASSOCIATES, PC, Attn: BOB L RING, ESQ., FORT COLLINS, CO, (Other Party).