Opinion
CASE NO. 1313 CRD-3-91-10
NOVEMBER 17, 1993
The claimant was represented by Harold Rosnick, Esq., who appeared at oral argument but did not file a brief.
The respondents were represented at the trial level by Michael Finn, Esq., Montstream and May. On appeal, respondent Kurt Volk, Inc. was represented by Barry J. Waters, Esq., Murtha, Cullina, Richter and Pinney. On appeal, respondent Connecticut Insurance Guaranty Association was represented by Charles W. Pieterse, Esq. and Margaret M. Wynne, Esq., Whitman and Ranson, and Joseph C. Tanski, Esq., and Jo Anne Rosenblum, Esq., Hutchins and Wheeler.
This Petition for Review from the September 26, 1991 Finding and Award of the Commissioner for the Third District was heard September 25, 1992 before a Compensation Review Board panel consisting of the Commission Chairman Jesse Frankl and Commissioners Frank J. Verrilli and James J. Metro.
OPINION
The Respondent-Insurer Connecticut Insurance Guaranty Association (CIGA) petitioned for review of that portion of the Third District Commissioner's September 26, 1991 Finding and Award ordering CIGA to pay interest pursuant to General Statutes Sec. 31-300 on the claimant's 78 weeks of permanent partial disability commencing with the first week after November 28, 1978, the date of maximum medical improvement, even though the medical report stating that the claimant had reached maximum medical improvement on that date was not issued until June 19, 1990. On appeal, CIGA claims that the trial commissioner's order that CIGA pay interest is contrary to the provisions of the Connecticut Insurance Guaranty Association Act, General Statutes Sec. 38a-836 to 38a-853, inclusive, as well as the provisions of the Workers' Compensation Act. We vacate the order of interest and remand the case for a new hearing to determine whether interest should be awarded and the time period during which the interest, if any, must be paid.
The Petition for Review was filed by both the respondent-employer and the respondent-insurer. After a Motion to Correct filed by both respondents was denied by the trial commissioner, each respondent obtained separate appellate counsel. Thereafter, only the respondent-insurer filed Reasons of Appeal. The briefs filed by the two respondents further confirm that only the respondent-insurer, Connecticut Insurance Guaranty Association, an appellant in this matter.
The following facts were submitted to the trial commissioner by stipulation of the parties. The claimant sustained a compensable injury to his back on September 11, 1970, while in the employ of the respondent-employer. A voluntary agreement dated January 11, 1971, was entered into between the claimant and the employer and was approved by the commissioner. The claimant reached maximum medical improvement on November 28, 1978. The report of the claimant's treating physician finding that the claimant had reached maximum medical improvement on November 28, 1978, however, was not made until June 19, 1990. Respondent, CIGA became involved in these proceedings because, at some point, the employer's compensation insurance carrier, American Mutual Liability Insurance Company, became insolvent.
The Finding and Award properly recites that the parties had stipulated to the following: "The finding that the claimant, Frank Versage, had reached maximum medical improvement on November 28, 1978 was not made or reported by [the claimant's treating physician] until June 19, 1990." (Emphasis added.) Upon his review of the evidence, however, the trial commissioner stated that he found that the claimant's treating physician "released his permanent partial disability rating . . . on June 19, 1990." (Emphasis added.) CIGA perceives a difference between these two characterizations of the finding of maximum medical improvement and made that perceived difference a subject of its Motion to Correct and an issue on appeal. Whatever arguable semantic differences may exist between the two characterizations of the treating physician's actions on June 19, 1990 or prior thereto, we will understand the commissioner's finding to accurately reflect the clear meaning of the stipulation and reject any unintended and unsupported implications which appear to concern CIGA on appeal.
I
Before addressing CIGA's arguments on appeal, we note that the trial commissioner did not direct his order for the payment of interest against the respondent-employer, Kurt Volk, Inc. Only CIGA was ordered to pay interest. "Whether an award should be made against an insurer alone rather than against the employer alone or against both is a matter of discretion vested in the commissioner, but in the exercise of that discretion the first consideration must be the interest of the injured employee. Where an insurer is seriously disputing its liability with the employer or with another insurer, an award against the insurer alone can hardly fail to result in a postponement of the payment to the employee . . . and where that is likely to result it is an abuse of discretion on the part of the commissioner to make such an award." (Emphasis added.) Witchekowski v. Falls Co., 105 Conn. 737, 741 (1927). Because CIGA disputes its liability for interest on statutory grounds not available to the employer, the commissioner should have made his award of interest against both CIGA and Kurt Volk, Inc. The employer's argument that it cannot be held responsible for interest because it was the insured and not the insurer on this claim is without merit. Sec. 31-300 specifically authorizes an award of interest against the employer as well as the insurer. Since we vacate the award of interest and order further proceedings, the commissioner should give further consideration to whether the award of interest, if any is ordered, should be directed against the employer as well as CIGA.
Kurt Volk, Inc. also argues that an award of interest pursuant to Sec. 31-300 is inappropriate because "it gained no `advantage' from the use of the money that the Guaranty Association is responsible for paying pursuant to the award." The determination of "whatever advantage the employer or insurer . . . may have had from the use of the money" as required by Sec. 31-300 is, of course, a factual matter for the trial commissioner to consider if interest is to be awarded pursuant to General Statutes Sec. 31-300 on remand.
II
We now turn to CIGA's arguments on appeal. At the outset, we note that many of CIGA's arguments are premised on the view that, notwithstanding his declaration that interest was awarded pursuant to General Statutes Sec. 31-300, the commissioner actually awarded interest pursuant to Sec. 31-295(c). In fact, CIGA argues in its brief that "the Commissioner erroneously cited Conn. Gen. Stat. Sec. 31-300 and that he in fact intended to award Claimant interest pursuant to Conn. Gen. Stat. Sec. 31-295(c)." We do not agree.
General Statutes Sec. 31-300 provides in pertinent part: "In cases where, through the fault or neglect of the employer or insurer, adjustments of compensation have been unduly delayed, or where through such fault or neglect, payments have been unduly delayed, the commissioner may include in his award interest at the rate prescribed in Section 37-3a and a reasonable attorney's fee in the case of undue delay in adjustments of compensation and may include in his award in the case of undue delay in payments of compensation, interest at twelve per cent per annum and a reasonable attorney's fee . . . . In cases where there has not been delay in either adjustment or payment, which delay has not been due to the fault or neglect of the employer or insurer, whether such delay was caused by appeals or otherwise, the commissioner may allow interest at such rate, not to exceed the rate prescribed in Section 37-3a, as may be fair and reasonable, taking into account whatever advantage the employer or insurer, as the case may be, may have had from the use of the money . . . ." (Emphasis added.)
General Statutes Sec. 31-295(c) provides in pertinent part: "If the employee is entitled to receive compensation for permanent disability to an injured member in accordance with the provisions of Sec. 31-308, the compensation shall be paid to him beginning not later than thirty days following the date of the maximum improvement of the member or members and, if the compensation payments are not so paid, the employer shall, in addition to the compensation rate, pay interest at the rate of six per cent per annum on such sum or sums from the date of maximum improvement."
An award of interest pursuant to Sec. 31-300 is justified in cases where there has been a delay in payment. Pokorny v. Getta's Garage, 22 Conn. App. 539, 542-44, rev'd on other grounds, 219 Conn. 439 (1991). Sec. 31-300 provides two bases for awarding interest. Where payments have been unduly delayed through the fault or neglect of the employer or insurer, the trial commissioner may include interest in his award at the rate of twelve percent. Where, on the other hand, the delay in payment has not been due to the fault or neglect of the employer or insurer, the trial commissioner may allow interest at a fair and reasonable rate, not to exceed the statutory rate of ten percent, taking into account whatever advantage the employer or insurer may have had from the use of the money.
General Statutes Sec. 37-3a provides for "interest at the rate of ten per cent a year." The legislative history of Sec. 31-300 and its provision permitting awards for interest due to delays in payment which are not attributable to the fault or neglect of the employer or insurer reflects that at the time of the claimant's original injury in 1970, section 31-300 provided the following: "In cases where, through the fault or neglect of the employer or insurer, adjustments of compensation have been unduly delayed, or where, through such fault or neglect, payments have been unduly delayed, the commissioner may include in his award interest at six per cent per annum. In cases where there has been delay in either adjustment or payment, which delay has not been due to the fault or neglect of the employer or insurer, whether such delay was caused by appeals or otherwise, the commissioner may allow interest at such rate, not to exceed six per cent per annum, as may be fair and reasonable, taking into account whatever advantage the employer or insurer, as the case may be, may have had from the use of the money, the burden of showing that the rate in such case should be less than six per cent per annum to be upon the employer or insurer. . . ." (Emphasis added)
The pertinent provision of Sec. 31-300 was subsequently amended by public acts 79-80, 89-17 and most recently by 89-316 which provided in pertinent part: "In cases where there has been delay in either adjustment or payment, which delay has not been due to the fault or neglect of the employer or insurer. . . the commissioner may allow interest at such rate, not to exceed the rate prescribed in section 37-3a. . . ." (Emphasis added)
In the present case, the commissioner found that the delay in payment was not due to the fault or neglect of the respondent. It is clear, then, that interest was not awarded pursuant to the first basis set forth in Sec. 31-300. The interest award, however, falls squarely within the second basis set forth in Sec. 31-300. That the interest award might also be justified under Sec. 31-295(c) is irrelevant, as the commissioner explicitly denominated his award as being made pursuant to Sec. 31-300. Since the award of interest was made pursuant to Sec. 31-300, CIGA's challenges to an award under Sec. 31-295(c) are without merit. Where applicable, however, we will treat CIGA's claims on appeal as challenges to the commissioner's award of interest pursuant to Sec. 31-300.
A
CHALLENGES TO AWARD OF INTEREST UNDER THE CONNECTICUT INSURANCE GUARANTY ASSOCIATION ACT
Respondent CIGA posits that several provisions of the Connecticut Insurance Guaranty Association Act (Guaranty Act) insulate or limit its liability to pay interest under the circumstances of this case. We now turn to these arguments.
In a supplemental brief, CIGA contends that the Workers' Compensation Commission lacks subject matter jurisdiction over the interpretation of the Connecticut Insurance Guaranty Act. We do not agree. We note that if CIGA is correct, then we could not be able to address many of its arguments on appeal. More importantly, however, the issue is whether the commissioner properly awarded interest pursuant to Sec. 31-300. At its core, then, this appeal requires us to render an interpretation of the Workers' Compensation Act and only incidentally to consider the ramifications of other legislation which might bear on the implementation of the Workers' Compensation Act.
The Guaranty Act's definition of a "covered claim" is important to understanding the obligations of CIGA under the Act. For purposes of this case, a "covered claim" is "an unpaid claim . . . which arises out of and is within the coverage and subject to the applicable limits of an insurance policy . . . issued by an [insolvent] insurer . . . ." General Statutes Sec. 38a-838(6). CIGA argues that the commissioner's award of interest does not arise out of or within the coverage of the workers' compensation insurance policy between the respondent-employer and the insolvent insurer. Instead, the interest award, according to CIGA, arose by way of the workers' compensation statute. We reject this narrow reading of the Guaranty Act.
The Guaranty Act's definition of "covered claim" must be understood in the context of the statutes governing the underlying insurance policies which it protects. See Connecticut Insurance Guaranty Association v. Union Carbide Corporation, 217 Conn. 371, 378-79 (1991). With regard to workers' compensation insurance policies, we must examine the requirements of General Statutes Sec. 31-287. "No policy of insurance against liability under [the Workers' Compensation Act] . . . shall be made unless the same covers the entire liability of the employer thereunder . . . ." General Statutes Sec. 31-287. In light of this requirement that workers' compensation insurance cover an employer's entire liability under the Act, there can be no distinction between a compensation award which arises out of a workers' compensation policy and one that arises out of the workers' compensation statute. See Plainville v. Travelers Indemnity Co., 178 Conn. 664, 674 (1979). By virtue of Sec. 31-287, they are necessarily one and the same.
For this reason, CIGA's reliance on McGloin v, Gateway Industries, 5 Conn. Workers' Comp. Rev. Op. 148, 618 CRD-1-87 (1988), is misplaced. There, the Second Injury Fund was held to be not liable for an award of interest because such payment was not enumerated in the statute setting forth its obligations. By contrast, CIGA's obligation is to pay the employer's entire workers' compensation liability, which can include an award of interest.
Consequently, the Guaranty Act's definition of "covered claim" does not serve to limit CIGA's liability where the award arises under the Workers' Compensation Act. Therefore, CIGA's argument that an award of interest pursuant to Sec. 31-300 is not a covered claim under Sec. 38a-836(6) must fail.
In a related argument, CIGA cites a number of cases from other jurisdictions interpreting their state's similar insurance guaranty statutes to prohibit the imposition of liability for statutory damages or penalties against the state's insurance guaranty association. See, e.g., Rowley v. First Columbia Life Ins., 741 F.Sup. 1259 (S.D. Miss. 1989); Hall v. Louisiana Insurance Guaranty Association, 589 So.2d 93 (La.App. 1991); Vaughn v. Vaughn, 597 P.2d 932 (Wash.App. 1979). The reasoning underlying those cases is that such an award does not arise out of the underlying insurance coverage and is therefore not a "covered claim." This reasoning is not applicable in the context of workers' compensation insurance where all liability under the Workers' Compensation Act is, by virtue of Sec. 31-287, covered by workers' compensation insurance. In addition, we note that this case does not involve an award of interest under that portion of Sec. 31-300 which might be characterized as a penalty provision for delay due to employer or insurer fault or neglect but rather an award based on delay without fault and the fact that such delay may allow the employer or insurer to have the advantage of the use of money otherwise payable to the claimant.
For the same reason, CIGA's argument that Sec. 38a-841 (1)(a)(ii)(A) precludes CIGA from being responsible for an award of interest is without merit. Sec. 38a-841(1)(a)(ii)(A) limits CIGA's obligation to pay a workers' compensation claimant to an amount not "in excess of the obligation of the insolvent insurer under the policy form or coverage from which the claim arises." CIGA's attempt to distinguish between policy coverage for workers' compensation claims and an award of statutory interest pursuant to the Workers' Compensation Act is unavailing in light of the requirement of Sec. 31-287 that workers' compensation insurance cover the employer's entire liability under the Act.
CIGA also argues that, even if we conclude that the interest award is a "covered claim," its obligation to pay interest ceased to accrue as of the date the underlying workers' compensation insurance carrier was determined to be insolvent. CIGA bases this argument on that portion of Sec. 38a-841(1)(a) which provides that CIGA shall be "obligated to the extent of the covered claims existing prior to the determination of insolvency . . . ." We do not agree.
The stipulation of the parties before the trial commissioner did not state the date on which the original workers' compensation carrier, American Mutual Liability Insurance Company, became insolvent. Although the date "1989" appeared in CIGA's trial brief and was not disputed by the claimant, that date was not agreed to by the parties or otherwise placed in evidence before the trial commissioner. An unsigned June 5, 1992 "stipulation" between the claimant and CIGA is appended to CIGA's appeal brief and states that "American Mutual Liability Insurance Company was determined to be insolvent on March 9, 1989." Despite the obvious evidentiary deficiencies in the record with respect to the date of insolvency, for purposes of addressing this argument on appeal we will accept the date proffered by CIGA.
CIGA's argument is based on an isolated phrase in Sec. 38a-841(1)(a). Additional statutory language in Sec. 38a-841(1)(a) evinces a clear legislative purpose to provide for full payment of workers' compensation claims. Although Sec. 38a-841(1)(a) guaranty association liability for most claims to $300,000 with a $100 deductible, the statute requires the association to pay "the full amount of any such claim arising out of a workers' compensation policy . . . ." The only limitation on the full amount requirement is the proviso that "in no event shall (A) said association be obligated to any claimant in an amount in excess of the obligation of the insolvent insurer under the policy form or coverage from which the claim arises, or (B) said association be obligated for any claim filed with the association after the expiration of two years from the date of the declaration of insolvency . . . ." Here, the original workers' compensation claim dates back to the 1970s. Any obligation to pay permanent partial disability benefits or interest thereon is a continuation of that original claim; see General Statutes Sec. 31-315; which is not affected by any of the limitations set forth in Sec. 38a-841(1)(a).
CIGA's final argument arising from the provisions of the Guaranty Act focuses on the Guaranty Act's immunity provision, General Statutes Sec. 38a-850. Section 38a-850 provides, in pertinent part, that "[t]here shall be no liability on the part of and no cause of action of any nature shall arise against . . . [CIGA] for any action taken by [it] in the performance of [its] powers and duties under [the Guaranty Act]." That provision, according to CIGA, precludes a trial commissioner from ordering CIGA to pay statutory interest because the delayed payment of benefits necessarily arises out of action taken by CIGA in the performance of its powers and duties under the Guaranty Act.
CIGA correctly points out that there are no reported Connecticut cases interpreting the immunity provisions of our Guaranty Act. Under such circumstances, we may look to the case law of other states with similar provisions. See Indiana Insurance Guaranty Association v. Kiner, 503 N.E.2d 923, 925 n. 4 (Ind.App. 1987). None of the cases from other jurisdictions relied on by CIGA, however, appears applicable to the facts of this case. In each of the cases cited by CIGA, Issacson v. California Insurance Guaranty Association, 750 P.2d 297 (Cal. 1988), Fernandez v. Florida Insurance Guaranty Association, 383 So.2d 974 (Fla.App. 1980); Pannell v. Missouri Insurance Guaranty Association, 595 S.W.2d 339 (Mo.App. 1980); Schreffler v. Pennsylvania Insurance Guaranty Association 586 A.2d 983 (Pa.Super. 1991); the immunity provision was held to bar a tort action against the guaranty association arising out of its conduct in the settlement of a claim. A tort action against a guaranty association is decidedly different from a claim for interest arising out of the underlying insurance contract and falling within the Guaranty Act's definition of a "covered claim." In fact, the reasoning of the Issacson court supports this view that the "covered claim" and immunity provisions must be read together. See Issacson v. California Insurance Guaranty Association, supra, 303-07. Moreover, the courts of Louisiana, which have likewise precluded guaranty association liability for a statutory cause of action for penalties and attorneys' fees due to untimely payment of claims; see, e.g., Hall v. Louisiana Insurance Guaranty Association, 589 So.2d 93 (La.App. 1991); have permitted an award of interest on judgments against the guaranty association. Aramburo v. Travelers Ins. Co., 438 So.2d 274 (La.App.), writ denied, 443 So.2d 1110 (La. 1983); see also Sifers v. General Marine Catering Co., 892 F.2d 386, 396-98 (5th Cir. 1990). The Aramburo court interpreted a Louisiana provision identical to General Statutes Sec. 38a-841(1)(b) to obligate the guaranty association to pay legal interest much as any other insurer-litigant would be so obligated. Aramburo v. Travelers Ins. Co., supra, 276. As the Aramburo court noted, this result furthers the purposes underlying the insurance guaranty statute to prevent delay and financial lose due to an insurer's insolvency. Id. A contrary interpretation would frustrate the remedial purpose of both the Workers' Compensation Act; see Adzima v. UAC/Norden Division, 177 Conn. 107, 117 (1979); and the Insurance Guaranty Association Act. See Connecticut Insurance Guaranty Association v. Union Carbide Corporation, supra, 384. Under these circumstances, then, it appears that a requirement to pay statutory workers' compensation interest due to incidental delay in payment and the fact that the insurer has had the advantage of the use of the money does not implicate the guaranty association's "performance of [its] powers and duties under [the Guaranty Act]"; General Statutes Sec. 38a-850; but the fact that the association is "deemed the insurer to the extent of its obligations on the covered claims and to such extent shall have all rights, duties, and obligations of the insolvent insurer if the insurer had not become insolvent." General Statutes Sec. 38a-841(1)(b).
General Statutes Sec. 38a-841(1)(b) provides: "Said [insurance guaranty] association shall . . . be deemed the insurer to the extent of its obligations on the covered claims and to such extent shall have all rights, duties, and obligations of the insolvent insurer as if the insurer had not become insolvent."
CIGA's claims that the Connecticut Insurance Guaranty Association Act insulates it from liability or otherwise limits its liability with respect to an order of interest pursuant to Sec. 31-300 is, therefore, without merit.
B
CHALLENGES TO THE AWARD OF INTEREST RETROACTIVE TO THE DATE OF MAXIMUM MEDICAL IMPROVEMENT.
On June 19, 1990, the claimant's treating physician, Harry P. Engel, made a determination that the claimant had a fifteen percent permanent partial disability of his lumbar spine and that he had reached maximum medical improvement on November 28, 1978, when he was last seen by Dr. Engel. Sometime thereafter, the claimant made a request for permanent partial benefits pursuant to Sec. 31-308. In his September 26, 1991 Finding and Award, the commissioner awarded interest commencing with the first week after November 28, 1978.
No finding was made as to when the claimant made his request for permanent partial benefits pursuant to Sec. 31-308.
General Statutes Sec. 31-295(c) provides that interest on an award of permanent partial benefits shall run "from the date of maximum improvement" if such award is not paid within thirty days of maximum improvement. The award of interest in this case, however, was made pursuant to Sec. 31-300, not Sec. 31-295(c). Therefore, we have no cause to interpret the requirements of Sec. 31-295(c) as they might apply to the circumstances of this case.
An award of interest pursuant to Sec. 31-300 is committed to the commissioner's discretion. Balkus v. Terry Steam Turbine Co., 167 Conn. 170, 181 (1974). Where delay in the payment of an award has not been due to the fault or neglect of the employer or insurer, the award of interest is intended to account for "whatever advantage the employer or insurer, as the case may be, may have had from the use of the money." General Statutes Sec. 31-300. In the case of an award of permanent partial disability pursuant to Sec. 31-308, the claimant is entitled to receive such an award when the claimant reaches maximum medical improvement and when the claimant thereafter makes a request for such an award. McCurdy v. State, 227 Conn. 261, 268-89 (1993). Although the claimant here reached maximum improvement in 1978, the date of maximum improvement was not established until 1990. It was only when his demand for payment of the Sec. 31-308 benefits was made thereafter that the employer and the insurer were obligated to make payment. An award of interest based on the advantage the employer or insurer may have had from the use of the money for that compensation award, therefore, could not logically have predated the determination of maximum medical improvement and the claimant's demand for Sec. 31-308 benefits. Accordingly, since the delay in the determination of maximum improvement in this case limited the commissioner's authority to award interest pursuant to Sec. 31-300 to the period following a request for Sec. 31-308 benefits based on that determination, we conclude that the commissioner abused his discretion in ordering the payment of interest commencing with the first week after the date of maximum medical improvement.
Further, since it is apparent that the commissioner examined the question of delay in payment by looking to the date of maximum medical improvement instead of the date of demand for Sec. 31-308 benefits in making his finding of delay for purposes of Sec. 31-300, see footnote 11, supra, we vacate the commissioner's order of interest and remand for a new hearing to determine (1) whether an award of interest pursuant to Sec. 31-300 or Sec. 31-295(c) is appropriate and (2) if so, when interest should commence.
The trial commissioner's award of interest is vacated and the case is remanded for further proceedings with respect to the question of whether interest pursuant to General Statutes Sec. 31-295(c) or Sec. 31-300 should be awarded against either or both of the respondents.
Commissioners Frank J. Verrilli and James J. Metro concur.