Opinion
W.C. No. 4-344-781.
July 18, 2005.
FINAL ORDER
The claimant and the respondent both seek review of an order of Administrative Law Judge Stuber (ALJ Stuber) dated January 19, 2005, which assessed penalties for the respondent's violation of former § 8-43-203(2)(b)(I), C.R.S. 1996. We affirm.
This matter was previously before us, and a brief procedural history is necessary to understand our resolution of the issues on appeal. The claimant suffered a compensable injury in 1995. In 1997, the respondent paid the claimant permanent partial disability (PPD) benefits of $10,296. On February 15, 2001, ALJ Harr awarded the claimant benefits for permanent and total disability (PTD) commencing September 4, 1997, subject to allowable offsets and credits for PPD benefits previously paid.
On April 24, 2001, the respondent filed a Final Admission of Liability (FAL) for PTD benefits. The "Remarks" section of the FAL stated: "[P]ayment of PPD paid from 9/4/97 to 12/28/98 of $10,296.00 to be taken as a credit against future payments of PTD." (Emphasis added). The claimant objected to the April 24 FAL and requested a hearing on the "overpayment alleged by Respondents." A hearing was scheduled for August 22, 2001. On August 20, 2001, the respondent filed a corrected FAL for the payment of PTD benefits which stated: "[P]ayment of PPD from 9/4/97 to 12/28/98 of $10,296.00 has been taken as a credit against PTD payments." (Emphasis added). However, the "Remarks" section of the FAL still listed an overpayment of $10,296.
ALJ Harr subsequently granted summary judgment dismissing the penalty claim. However, we set aside ALJ Harr's order and remanded the matter for further proceedings on the penalty claim.
On remand, ALJ Stuber determined the respondent failed to present an objectively reasonable basis for mistakenly asserting a credit against future PTD benefits when the credit had already been taken. Therefore, ALJ Stuber entered an order dated January 29, 2003, which imposed penalties. Both parties timely appealed the January 29 order.
On review of the January 29 order, we concluded that our remand order, which effectively granted a partial summary judgment on the question of whether the respondent violated the § 8-43-203(2)(b)(I), was improper. Consequently, in an order issued on September 11, 2003, we set aside the January 29 order and remanded the matter for a further evidentiary hearing on all issues and defenses relevant to the claimant's request for penalties.
On remand, ALJ Stuber held an evidentiary hearing on May 24, 2005, and issued an order which he determined the April 24 FAL violated § 8-43-203(2)(b)(I) because it was ambiguous about the amount of benefits to be paid for PTD. ALJ Stuber then imposed penalties at the rate of $20 per day for 118 days commencing April 24 and ending August 20, 2001, for a total of $2,360. Both parties sought review of the May 2004 order.
On review of the May 2004 order we agreed with the claimant that the findings did not support the termination of penalties on August 20, 2001. Therefore, we set aside the order and remanded the matter for further findings and the entry of a new order concerning the amount and duration of penalties.
On remand ALJ Stuber determined the respondent failed to completely cure the violation of § 8-43-203(2)(b)(I), at any time between August 20, 2001 and the March 29, 2004 hearing, because the amended FAL continued to assert that an overpayment existed on the claim. However, ALJ Stuber found that after August 20, 2001, the FAL no longer asserted any method of recouping the alleged overpayment. Under these circumstances, ALJ Stuber determined a smaller penalty was warranted for the uncured violation after August 20, 2001. The January 19, 2005 order imposed penalties at the rate of $20 per day from April 24 to August 20, 2001 and penalties at the rate of $1 per day for 951 days between August 20, 2001 and March 29, 2004. Both parties timely appealed the January 19 order.
I. A.
The respondent contends that the penalty claim was not specifically pled as required by § 8-43-304(4), C.R.S. 2004, and therefore, argues the ALJ's assessment of penalties was a denial of due process. In support, the respondent contends that the claimant's original Application for Hearing requested penalties against the respondent because the April 24, 2001 FAL asserted an overpayment "to be taken as a credit against future payments of PTD." In contrast, the respondent asserts it had no notice until the May 24, 2004 hearing that the claimant disputed the August 21, 2001 amended FAL insofar as it continued to assert an "overpayment." We are not persuaded.
Initially, we reject the claimant's contention that this argument was not preserved for appellate review because the respondent did not appeal the May 2004 order which required them to pay penalties of $20 per day. Our order of remand set aside the May 2004 assessment of penalties and required ALJ Stuber to redetermine the amount and duration of penalties to be imposed. Therefore, the respondent's failure to appeal the May 2004 was not fatal.
Moreover, the respondent timely appealed ALJ Stuber's order on remand. Consequently, the respondent's argument was preserved for review.
The fundamental requirements of due process are notice and an opportunity to be heard. Due process contemplates that the parties will be apprised of the evidence to be considered, and afforded a reasonable opportunity to present evidence and argument in support of their positions. Inherent in these requirements is the rule that parties will receive adequate notice of both the factual and legal bases of the claims and defenses to be adjudicated. See Hendricks v. Industrial Claim Appeals Office, 809 P.2d 1076, 1077 (Colo.App. 1990).
The applicable law is undisputed. Section 8-43-304(1), C.R.S. 2004, affords the ALJ discretionary authority to impose a penalty of up to $500 a day for an insurer's unreasonable violation of the Workers' Compensation Act. The amount of the penalty may be based on consideration of several factors including the extent of harm to the claimant, the duration and type of violation, the insurer's motivation for the violation, the insurer's mitigation, and whether or not the misconduct is representative of a pattern of misconduct. See Pueblo School District No. 70 v. Toth, supra; Trumble v. Choice Casing Service, Inc., W.C. No. 4-125-136 (March 29, 1996), aff'd. Choice Casing Service, Inc. v. Industrial Claim Appeals Office, Colo. App. No. 96CA0664, January 16, 1997 (not selected for publication).
Section 8-43-304(4), provides that an application for hearing on penalties "shall state with specificity the grounds on which the penalty is being asserted." We have previously held that the purpose of requiring that an application for hearing on penalties specifically state the grounds on which the penalty is being asserted, is to notify the insurer of the alleged conduct which must be corrected so as to afford an opportunity to cure. Stilwell v. B B Excavating Inc., W.C. No. 4-337-321 (July 28, 1999). We adhere to our previous conclusions. See Hendricks v. Industrial Claim Appeals Office, supra; Carson v. Academy School District #20, W.C. No. 4-439-660 (April 28, 2003).
The claimant's May 7, 2001 Application for Hearing requested penalties because the April 24, 2001 FAL alleged an "overpayment." The respondent's August 20, 2001 amended FAL deleted language that the overpayment would be taken as an offset against PTD benefits, but still alleged an overpayment. Under these circumstances, we conclude the claimant's subsequent Application for Hearing dated August 30, 2001, which requested penalties for the respondent's assertion of an "overpayment" of benefits, supports ALJ Stuber's implicit determination that the respondent had sufficient advanced notice that the claimant remained dissatisfied with the respondent's assertion of an overpayment.
B.
In addition, the record supports ALJ Stuber's finding that the respondent's never completely cured the violation of § 8-43-203(2)(b)(I). Therefore, we also reject the respondent's contention that the penalty claim was governed by the requirement in § 8-43-304(4), that the party who seeks a penalty to prove by "clear and convincing evidence" that the violator knew or reasonably should have known such person was in violation.
II.
The claimant points out that the respondent's adjuster steadfastly refused to admit any error, and testified that she would assert the same overpayment again under similar facts. Therefore, the claimant argues the record fails to support the ALJ's finding that the respondent's violation was the "simply a mistake out of negligence" rather than the undertaking of intentional conduct. We disagree.
The ALJ's findings must be upheld if supported by substantial evidence and may be based on inferences from circumstantial evidence. The issue on review then becomes whether the ALJ's inferences were permissible in light of the totality of circumstances. Ackerman v. Hilton's Mechanical Men, Inc., 914 P.2d 524 (Colo.App. 1996); Lantern Inn v. Industrial Commission, 624 P.2d 929 (Colo.App. 1981). In this regard, ALJ Stuber was not bound by the adjuster's characterization of her actions. See Levy v. Everson Plumbing Co., Inc., 171 Colo. 468, 468 P.2d 34 (1970); Colorado Springs Motors, Ltd. v. Industrial Commission, 165 Colo. 504, 441 P.2d 21 (1968) (ALJ may credit all, part, or none of a witness' testimony).
As argued by the claimant, the adjuster testified that she "intentionally" prepared the FAL as she did, because she thought it was consistent with the order awarding PTD benefits and that it complied with her training on the preparation of FALs. However, the adjuster admitted she knew there was no overpayment which would entitle the respondent to a credit against future installment payments of PTD benefits and that the FAL incorrectly left it unclear whether the respondent would reduce future PTD benefits to recover overpaid permanent partial disability benefits. The adjuster also stated that when she finally understood the nature of the claimant's objection to the April 24 FAL and the error, she filed a corrected FAL to eliminate the language that the overpayment was yet to be recovered. (Tr. pp. 42, 44, 46, 49). Based on this evidence, ALJ Stuber reasonably inferred that the erroneous FAL was the result of negligence and not the adjuster's intention to deprive the claimant of any monies lawfully due.
In any case, the claimant contends the amount of the penalty imposed by the ALJ on remand is legally inadequate to deter future similar conduct and is disproportionate to the amount of litigation the claimant was required to initiate.
We may not disturb the ALJ's determination of the amount of the penalty to be imposed in the absence of fraud or an abuse of discretion. See Northern Telecom, Inc. v. Industrial Claim Appeals Office (Colo.App. 02CA2052, December 24, 2003) (not selected for publication); Hall v. Home Furniture Co., 724 P.2d 94 (Colo.App. 1986); Brunetti v. Industrial Commission, 670 P.2d 1246 (Colo.App. 1983). The legal standard for review of an alleged abuse of discretion is whether, under the totality of the factual circumstances at the time of the ALJ's determination, the ALJ's order "exceeds the bounds of reason." Rosenberg v. Board of Education of School District #1, 710 P.2d 1095 (Colo. 1985). The application of this standard includes consideration of whether the ALJ's determination is supported by substantial evidence and the applicable law. Coates, Reid Waldron v. Vigil, 856 P.2d 850 (Colo. 1993). Furthermore, we have previously construed from the Northern Telecom decision that when determining whether an award of penalties constitutes an abuse of discretion we must consider whether amount of the penalty is disproportionate to the conduct. See Moland v. Industrial Claim Appeals Office, 111 P.3d 507 (Colo.App. 2004). We adhere to our prior conclusions.
Here, the record contains substantial evidence to support ALJ Stuber's finding that the totality of circumstances did not warrant either a minimal penalty or a maximum penalty. For example, the adjuster correctly calculated the amount of the credit to be taken from previously paid benefits and paid the claimant the correct amount of PTD benefits despite the ambiguous FALs. Thus, the record does not demonstrate a pattern or practice to wrongfully withhold monies due the claimant. Further, once the adjuster understood that the claimant was distressed that the alleged overpayment would be recouped from a prospective reduction of PTD benefits, the adjuster filed an amended FAL which no longer asserted the offset. Under these circumstances, ALJ Stuber could reasonably infer that a greater penalty was not necessary to deter the respondent from asserting similar wrongful offsets in the future.
The claimant is obviously dissatisfied that ALJ Stuber did not give greater consideration to the costs incurred by the claimant to litigate the penalty claim. However, the penalty rate imposed by the ALJ order falls within the statutory parameters for the imposition of penalties under § 8-43-304(1), and we are not persuaded it is disproportionate to the harm caused to the claimant. Therefore, we are not persuaded the total penalty of $3311 exceeds the bounds of reason.
IT IS THEREFORE ORDERED that ALJ's order dated January 19, 2005, is affirmed.
INDUSTRIAL CLAIM APPEALS PANEL
____________________________________ Kathy E. Dean
____________________________________ Robert M. Socolofsky
Inez Anderton, Roosevelt, UT, Hewlett Packard/Agilent Technologies, Colorado Springs, CO, Emily Finn, Sedgwick CMS, Greenwood Village, CO, Special Funds, Division of Workers' Compensation — Interagency Mail Steven U. Mullens, Esq., Colorado Springs, CO (For Claimant).
David J. Dworkin, Esq. and Bernadette Wasilik, Esq., Denver, CO (For Respondent).