Opinion
W.C. No. 4-508-408
November 17, 2003
FINAL ORDER
The claimant seeks review of an order of Administrative Law Judge Jones (ALJ) insofar as the order granted "summary judgment" concerning the claimant's request for the imposition of penalties against the respondents. The respondents seek review of the ALJ's order insofar as it determined the respondents are not entitled to seek penalties under § 8-43-304(1), C.R.S. 2003, based on the claimant's violation of a discovery order. We affirm the dismissal of the claimant's request for penalties, set aside the ALJ's denial of penalties based on the discovery violation, and remand for entry of a new order on the discovery violation.
The claimant alleged she sustained back injuries on June 18, 2001. Prior to the filing of any application for the hearing, the respondents served interrogatories on the claimant requesting information concerning the basis of the claim and benefits sought under the claim. The claimant did not respond to the interrogatories and on November 1, 2001, the respondents filed a motion to compel discovery. On November 15, 2001, a prehearing administrative law judge (PALJ) granted the motion and ordered the claimant to provide the requested information within 10 days. The claimant requested reconsideration of the order arguing that discovery is improper in the absence of a pending application for hearing. However, on January 11, 2002, the PALJ denied the request for reconsideration, ruling that § 8-43-207.5, C.R.S. 2003, grants the PALJ authority to rule on discovery issues despite the lack of a pending application for hearing.
In January 2003, the respondents filed an application for hearing seeking penalties under § 8-43-304 based on the claimant's failure to comply with the PALJ's discovery orders. The claimant filed a response to application seeking penalties against the respondents for "manufacturing controversy despite knowing that this claim is on appeal" and for failing to deal with the claimant in good faith by "attempting to intimidate the Claimant with threats of penalties regarding discovery impermissibly sought."
On April 16, 2003, the respondents filed a motion for summary judgment alleging that claimant's request for penalties failed to state a claim and should be dismissed as a matter of law. The claimant did not respond to this motion and the matter was taken up at the commencement of the hearing held on April 30, 2003. The claimant argued to the ALJ that the request for penalties was not amenable to adjudication without an evidentiary hearing. However, the ALJ disagreed and granted respondents' request to strike the claimant's request for penalties. (Tr. P. 13).
The ALJ also denied the respondents claim for penalties based on violation of the PALJ's orders. Citing Reed v. Industrial Claim Appeals Office, 13 P.3d 810 (Colo.App. 2000), the ALJ ruled that because § 8-43-207(1)(e), C.R.S. 2003, and C.R.C.P. 37, authorize various sanctions for failure to comply with discovery orders, "no separate penalty may be imposed under" § 8-43-304(1). In reaching this result, the ALJ declined to address the claimant's statute of limitations argument, and made no express determination of whether it would be appropriate to impose penalties on the claimant under the circumstances of this case.
I.
The claimant filed a petition to review the ALJ's order, but did not file a brief in support of the petition. The petition asserts the ALJ's dismissal of the claimant's request for penalties was inappropriate because the Act "does not contemplate the litigation of factual controversies outside of the hearing on the record." We find no error in this regard.
It is true that parties are entitled to a hearing where administrative adjudications turn on disputed issues of fact. Section 8-43-207(1), C.R.S. 2003; Hendricks v. Industrial Claim Appeals Office, 809 P.2d 1076 (Colo.App. 1990). For this reason we have ruled that it is improper to dismiss entire claims for relief based solely on a motion without affording the claimant an opportunity to present evidence which might reduce discovery sanctions to a lower level. Further, a motion to dismiss an entire claim for relief is substantive and failure to respond to such a motion does not authorize an ALJ to deem the motion confessed under Rule VIII (D)(2), 7 Code Colo. Reg. 1101-3, nor does such failure constitute waiver of the right to a hearing. Hildebrandt v. Metro Temps, W.C. No. 4-324-902, (November 3, 2003).
However, a hearing is not necessary if the record reveals the issue is one of law and that no material issues of fact are in dispute. This principle applies to claims for penalties. See Provo v. Industrial Claim Appeals Office, 66 P.3d 138 (Colo.App. 2002). Here, we find no disputed issues of material fact and conclude the ALJ correctly dismissed the penalty claims as a matter of law.
The claimant's first penalty claim asserts violations of § 8-40-102(1), C.R.S. 2003, § 8-43-201, C.R.S. 2003, and § 8-43-207, C.R.S. 2003, because the respondents were "manufacturing controversy despite knowing that this claim is on appeal in the Court of Appeals and for due process reasons." In order to establish entitlement to relief under § 8-43-304(1) for violation of the Act, the claimant was required to establish that the respondents violated one or more statutory obligations imposed by these sections. See Allison v. Industrial Claim Appeals Office, 916 P.2d 623 (Colo.App. 1995).
Section 8-40-102(1) is the "legislative declaration" concerning interpretation of the Act. It does not impose any specific duties or responsibilities on any party. Consequently, as a matter of law there is no basis for imposing a penalty against the respondents based on this section. Provo v. Industrial Claim Appeals Office, 66 P.3d at 138. Similarly, § 8-43-201 creates jurisdiction for administrative law judges and the Director of the Division of Workers' Compensation (Director) to adjudicate cases, assigns the burden of proof, and provides that a workers' compensation case "shall be decided on its merits." This section does not impose any particular duty or responsibility on the respondents. Therefore, the respondents cannot be charged with "violating" this provision for the purposes of imposing a penalty.
Section 8-43-207 provides for hearings and creates authority for administrative law judges to perform various activities in connection with hearings. However, none of the provisions of this statute may fairly be construed as addressing the "manufacturing of controversy" knowing that a claim is "on appeal." Indeed, the claimant's response to the application for hearing does not point to any specific provision of § 8-43-207 which she asserts was violated by the respondents. Further, when given an opportunity to explain the allegations at hearing, claimant's counsel simply stated that he planned to address them during the hearing. He did not explain what material facts were in dispute which could justify the imposition of a penalty under § 8-43-207. (Tr. Pp. 5-7).
The claimant's second request for penalties is based on the assertion that the respondents failed "in the duty to treat the claimant with good faith and to deal with her fairly as the intended beneficiary of the contract of insurance." The request cites the same statutory provisions and adds Rule of Procedure VIII. The request further asserts there were attempts to "intimidate"the claimant with requests for penalties based on impermissible discovery. For the same reasons stated above, this claim is without merit as a matter of law. None of the provisions cited by the claimant creates a "duty of good faith" on which a statutory violation could be predicated for purposes of imposing penalties under § 8-43-304(1). Indeed, claims for bad faith adjustment under a contract of insurance occur outside the workers' compensation context. See Vaughn v. McMinn, 945 P.2d 404 (Colo. 1997); Travelers Insurance Co. v. Savio, 706 P.2d 1258 (Colo. 1985); Villa v. Wayne Gomez Demolition Excavating, Inc., W.C. No. 4-236-951 (January 7, 1997).
II.
The respondents contend the ALJ erred in dismissing their claim for penalties under § 8-43-304(1) because § 8-43-207(1)(e) and C.R.C.P. 37 provide for specific penalties based on discovery violations. We agree with respondents that this is an erroneous basis for dismissing the claim for penalties.
It is true that Reed v. Industrial Claim Appeals Office, supra, cited by the ALJ, held that penalties for discovery violations could not be imposed under § 8-43-304(1) because "that section applies only when there is not a specific penalty for the violation." 13 P.3d at 812. However, that conclusion was predicated on the court's reading of Sears v. Penrose Hospital, 942 P.2d 1345 (Colo.App. 1997).
Subsequent to Reed and Sears, our Supreme Court decided Holliday v. Bestop, Inc., 23 P.3d 700 (Colo. 2001). In Holliday, the court held that the phrase "for which no penalty has been specifically provided" contained in § 8-43-304(1) applies to that portion of the statute concerning persons who fail or refuse to perform "any duty lawfully enjoined within the time prescribed by the director or panel," but does not apply to the subsequent phrase concerning failure, neglect, or refusal to obey any lawful order by the Director or the panel. Further, Holliday overruled the "gravamen" test employed by the court in Sears v. Penrose Hospital, supra. Giddings v. Industrial Claim Appeals Office, 39 P.3d 1211 (Colo.App. 2001).
Here, the respondents alleged violation of a discovery order issued by a PALJ. The order of a PALJ is an order of the Director. Section 8-43-207.5(3), C.R.S. 2003. Because the respondents alleged violation of an order, § 8-43-304(1) authorizes the imposition of penalties regardless of the fact that the Act may also provide specific penalties for the conduct in question. It follows the ALJ erred in dismissing the respondents' request for penalties based on Reed and Sears. The Court of Appeals reached the same conclusion in the unpublished case of Tooley v. Industrial Claim Appeals Office, (Colo.App. No. 01CA0222, September 27, 2001) (not selected for publication). The Tooley court stated that "when the order is one compelling discovery, the ALJ may, in its discretion, order penalties based on either § 8-43-304(1) or the specific penalty provision for discovery."
Consequently, the matter must be remanded to the ALJ to reconsider the respondents' request for the imposition of penalties under § 8-43-304(1). In reaching this result, we should not be understood as expressing any opinion concerning the merits of the request for penalties or the claimant's defenses, including the statute of limitations defense and the assertion that the PALJ's order was not "lawful." We merely conclude the ALJ's stated basis for denying the request for penalties was improper.
In light is this determination, it is premature to address the claimant's assertion that attorney fees and costs should be assessed against the respondents pursuant to § 8-43-211(2)(d), C.R.S. 2003.
IT IS THEREFORE ORDERED that the ALJ's order dated May 5, 2003, is set aside insofar as it denied the respondents' request for the imposition of penalties under § 8-43-304(1). On this issue, the matter is remanded for entry of anew order consistent with the views expressed herein. The order shall be based on the existing record and an additional hearing is not authorized.
IT IS FURTHER ORDERED that the ALJ's order is affirmed insofar as it denied the claimant's request for the imposition of penalties.
INDUSTRIAL CLAIM APPEALS PANEL
______________________________ David Cain
______________________________ Kathy E. Dean
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 November 17, 2003 by A. Hurtado ___________________ .
Sally Williams, 1001 Fuller Wiser Rd., Apt. 613, Eulef, TX 76039
Judy Bolinski, Tyco International, Inc., 1 Town Center Rd., Boca Raton, FL 33486
Lauren Jordan, Sedgwick Claims Management Services, Inc., 7400 E. Orchard Rd., #4015, Greenwood Village, CO 80111
Chris L. Ingold, Esq., 501 S. Cherry St., #500, Denver, CO 80246 (For Claimant)
Jonathan A. Decker, Esq. and Jon Atkins, Esq., 1700 Broadway, #1900, Denver, CO 80290
(For Respondents)