Opinion
W.C. No. 4-344-781.
November 23, 2004.
ORDER OF REMAND
The claimant seeks review of an order of Administrative Law Judge Stuber (ALJ Stuber) which assessed penalties for the respondent's violation of former § 8-43-203(2)(b)(I), C.R.S. 1996. We set aside the order and remand the matter for a new determination of penalties.
This matter was previously before us, and a brief procedural history is necessary to understand 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 March 9, 2001, the respondent made a lump sum payment of accrued PTD benefits, less a credit of $10,296.00 for PPD previously paid for a period of PTD. The "Remarks" section of a final admission of liability (FAL) dated April 24, 2001, 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.
The claimant requested the respondent be penalized for alleging an overpayment on the April 24 FAL when the overpayment had already been taken, but ALJ Harr granted summary judgment dismissing the penalty claim. We subsequently set aside ALJ Harr's order and remanded the matter for further proceedings on the question of whether the respondent's actions were objectively reasonable for purposes of assessing penalties under § 8-43-304(1), C.R.S. 2004.
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 to the ALJ to afford the parties an evidentiary hearing on all issues and defenses relevant to the claimant's request for penalties.
On remand, ALJ Stuber held an evidentiary hearing and issued an order dated May 24, 2004, in 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. Specifically, the "overpayment" language in the FAL left the claimant with the prospect that future PTD benefits would be reduced, when in fact the overpayment had already been recovered. The ALJ also determined the violation was objectively unreasonable. However, the ALJ determined the mistaken FAL was not intentional and was filed out of negligence. The ALJ 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. The claimant appealed the May 24 order.
On this appeal, the claimant contends the penalty amount is legally inadequate to deter future similar conduct. Instead, the claimant argues that a greater penalty is warranted because the respondent's error forced the claimant to initiate further litigation, and the respondent presented no evidence of mitigation.
For its part, the respondent contends that the penalty should be dismissed because the claimant failed to plead the penalty claim with specificity as required by § 8-43-304(4), C.R.S. 2004. The respondent also contends it cured the violation and the claimant failed to sustain the elevated burden of proof required by § 8-43-304(4). However, the respondent did not preserve these arguments by appealing the May 24 order. Therefore, these issues are not properly before us on review. Davila v. Merit System Council, 15 P.3d 781 (Colo.App. 2000); Ceretto v. Brighton School District 27-J, W.C. No. 4-167-575 (December 26,2003), aff'd. Ceretto v. Industrial Claim Appeals Office, Colo. App. No. 04CA0010, July 22, 2004 (not selected for publication).
Concerning the claimant's appeal, we initially note that the claimant's Designation of Record includes the "entire files maintained by the Division of Workers' Compensation and Division of Administrative Hearings." The record transmitted to us on appeal apparently does not include the complete Division of Workers' Compensation file and there is no evidence in the record which indicates the claimant requested the ALJ to consider the entire Division of Workers' Compensation file as part of the evidentiary record for the hearing. See City of Boulder v. Dinsmore, 902 P.2d 925 (Colo.App. 1995); Rules of Procedure, Part VIII(A)(6), 7 Code Colo. Reg. 1101-3 at 22. Further, our review is limited to the evidentiary record before the ALJ. Consequently, we have not obtained or considered the Division of Workers' Compensation file, and have restricted our review to the record made at the hearing.
The applicable law is undisputed. Section 8-43-304(1) 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).
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 Hall v. Home Furniture Co., 724 P.2d 94 (Colo.App. 1986); Brunetti v. Industrial Commission, 670 P.2d 1246 (Colo.App. 1983). There is no assertion of fraud in this case. Further, 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).
The claimant contends that because the adjuster denied any "mistake" or "error," the ALJ's finding that the violation was the result of negligence is not supported by the record. We disagree.
The ALJ's findings may be supported by inferences from circumstantial evidence, and the question on review is 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). Moreover, the ALJ 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 PTD award of ALJ Harr 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 another 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 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.
Further, the record contains substantial evidence to support the ALJ'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 April 24 FAL. Further, the claimant's testimony supports the ALJ's finding that the claimant's emotional distress about the claim existed prior to April 2001 and was not the result of the erroneous April 24 FAL.
However, we agree with the claimant that the ALJ's findings do not support the termination of penalties on August 20, 2001. Therefore, we set aside the order and remand the matter to the ALJ for further findings that issue.
The ALJ found that the respondent's corrected FAL issued on August 20, 2001, did not cure the violation because the August 20 FAL corrected only "part of its mistake." The ALJ also found that the August 20 FAL "continued to assert that an overpayment of $10,296 existed." ( See Conclusions of Law 4 and 5, pp. 5-6). Thus, as argued by the claimant, the ALJ's findings reflect a determination that the violation continued after August 20, 2001. Nevertheless, the ALJ also found that the respondent's violation existed from April 24 to August 20, 2001, and only imposed penalties to that date.
Because the ALJ found the violation was not cured on August 20, 2001, we are unable to ascertain the basis for the ALJ's decision not to impose any penalty beyond August 20, 2001. Since the ALJ's order is insufficient to permit review of the basis for the implicit denial of penalties after August 20, 2001, the matter must be remanded to the ALJ for additional findings and a new determination of the amount and duration of the penalty to be imposed.
In remanding the matter, we should not be understood as requiring the ALJ to impose a greater penalty. Rather, that is a matter within the sole discretion of the ALJ. We merely conclude that the ALJ's findings are insufficient to support the termination of penalties on August 20, 2001.
IT IS THEREFORE ORDERED that ALJ Stuber's order dated May 24, 2004, is set aside and the matter remanded to the ALJ for the additional findings and a new determination of penalties, consistent with the views expressed herein.
INDUSTRIAL CLAIM APPEALS PANEL
___________________ Kathy E. Dean
___________________ Bill Whitacre
Inez Anderton, Roosevelt, UT, Hewlett Packard/Agilent Technologies, Colorado Springs, CO, Emily Finn, Sedgwick CMS, Greenwood Village, CO, K. Pennucci, Special Funds, Division of Workers' Compensation — Interagency Mail, James A. May, Esq. and Steven U. Mullens, Esq., Colorado Springs, CO, (For Claimant).
David J. Dworkin, Esq. and Margaret Garcia, Esq., Denver, CO, (For Respondent).