Opinion
W.C. No. 4-397-575
December 10, 1999
FINAL ORDER
The claimant seeks review of a final order and corrected order of Administrative Law Judge Felter (ALJ Felter) which denied a request for penalties under § 8-43-304(1), C.R.S. 1999. The claimant argues the respondent-insurer violated § 8-42-105(1) C.R.S. 1999, because it failed to pay the correct amount of temporary total disability benefits. Underlying this contention is the assertion that the respondent-insurer violated § 8-42-102, C.R.S. 1999, by failing to admit for the correct average weekly wage. We affirm.
The claimant sustained a compensable injury on October 2, 1998. On October 14, 1998, the respondent-insurer filed a general admission of liability for temporary total disability benefits, based on an average weekly wage of $135.94. Attached to the admission was a verified document provided by the respondent-employer's risk management department indicating the claimant had been employed for nine weeks and earned a total of $1,223.45. This document stated the claimant worked five days per week, but did not reveal the number of hours worked each day. The admitted average weekly wage was derived by dividing the total amount earned by the number of weeks worked.
At the hearing, the claimant produced the employer's First Report of Injury dated October 2, 1998. The First Report states the claimant's average weekly wage was $320, based on $8.00 per hour and 40 hours per week. However, the insurance adjuster testified that it is not her practice to file admissions of liability based on first reports of injury without verifying wage information with employers. This is because, according to the adjuster, first reports of injury frequently contain inaccurate information. The adjuster testified that in this case the October 14 admission was based on the documented wage information which the employer faxed to her on October 14.
The claimant filed a timely objection to the general admission on October 19, 1998, and subsequently set the matter for hearing on the issue of average weekly wage. However, ALJ Felter found the claimant failed to provide the respondent-insurer with any documentation establishing a higher average weekly wage than that for which the respondents had already admitted liability. The matter proceeded to a hearing on February 4, 1999, and on March 1, 1999, ALJ Hopf entered an order increasing the average weekly wage to $274.88. At the hearing the respondents apparently stipulated to this wage. However, the ALJ rejected the claimant's proposed method for calculating an even higher wage.
In February 1999, the claimant applied for a hearing on the issue of penalties attributable to the respondent-insurer's "knowing, deliberate, reckless, or negligent failure to pay the proper amount of" compensation for temporary total disability from October 14 1998, until February or March, 1999. However, ALJ Felter denied the claim for penalties. He first concluded that penalties are not appropriate under § 8-43-304(1) because the claimant failed to establish that the respondent-insurer violated any provision of the Worker's Compensation Act (Act). In this regard, the ALJ found that the insurance adjuster's action in relying on the wage documents faxed to her on October 14 provided a reasonable basis for calculating the average weekly wage at $135.94. This was true despite the fact ALJ Hopf ultimately determined, and the respondents agreed, that the wage was higher. ALJ Felter also held the claimant failed to prove the respondent-insurer's actions were unreasonable as measured by an objective standard. Specifically, he found that use of the "verified employer wage records" constituted a reasonable basis for the admission of liability.
On review, the claimant argues the "undisputed facts" establish the respondent-insurer violated § 8-42-105 and § 8-42-102 by failing to admit for a higher average weekly wage. In support of this assertion the claimant relies on the fact that the admitted average weekly wage was "2.3 times less than what is called for by the employer's First Report." The claimant also argues that, assuming he worked 40 hours per week, the admitted average weekly wage was $3.40 per hour, which is substantially lower than the "Federal Minimum Wage of $5.15 per hour." We find no error in ALJ Felter's denial of penalties.
Section 8-43-304(1) provides for the imposition of penalties of up to $500 per day on an insurer "who violates any provision of articles 40 to 47 of this title." In order to impose penalties under this statute the ALJ must first determine that the disputed conduct constituted a violation of an express duty or prohibition established by the Act. Allison v. Industrial Claim Appeals Office, 916 P.2d 623 (Colo.App. 1995); Villa v. Wayne Gomez Demolition Excavating, Inc., W.C. No. 4-236-951 (Jan. 7, 1997). If the ALJ finds there was a violation of the Act, penalties may be imposed only if the ALJ concludes the insurer's actions were not reasonable under an objective standard. The reasonableness of the insurer's actions depends upon whether the actions were predicated on a rational argument based in law or fact. Diversified Veterans Corporate Center v. Hewuse, 942 P.2d 1312 (Colo.App. 1997). Determination of whether the insurer's conduct was reasonable is generally an issue of fact for resolution by the ALJ. Pueblo School District No. 70 v. Toth, 924 P.2d 1094 (Colo.App. 1996).
We agree with the ALJ that the record does not reveal a violation of any specific provision of the Act. The validity of the claimant's argument depends on a determination that the respondent-insurer was legally obligated to admit liability for a higher average weekly wage. However, as ALJ Felter noted, the statutory scheme for calculating the average weekly wage, found in § 8-42-102, affords an ALJ substantial discretion in determining the wage. Although § 8-42-102(2)(d) provides a mechanical formula for calculating the average weekly wage when the claimant is paid by the hour, § 8-42-102(3) permits the ALJ to depart from the formula when necessary to calculate a fair average weekly wage. See Drywall Products v. Constuble, 832 P.2d 957 (Colo.App. 1991).
Thus, the statute does not prescribe a precise method for calculating the average weekly wage, and an insurer does not violate the Act when it fails to admit for a specific wage. This is particularly true where, as here, the insurer established that on October 14, 1998, it obtained information from the employer providing a factual basis for the insurer's calculation of the average weekly wage. The mere fact that issues of law and fact were later resolved adversely to the respondents does not establish that the admission constituted a violation of the Act. Allison v. Industrial Claim Appeals Office, supra. Neither does the record establish that the respondent-insurer ever possessed information, prior to the hearing before ALJ Hopf, which would have compelled it to abandon its position on the average weekly wage.
Moreover, substantial evidence supports the ALJ's determination that, even if the insurer "violated" the Act by admitting for an incorrect average weekly wage, the claimant failed to prove the insurer's actions were unreasonable. As the ALJ recognized, the information provided by the employer on October 14 provided both a factual and legal basis for the respondent's calculation of the average weekly wage and the filing of the admission of liability. The mere fact that the data conflicted with the employer's First Report of Injury does not mandate a different conclusion. While a First Report of Injury may constitute some evidence of the claimant's's average weekly wage, a first report does not rise to the level of an admission of liability which binds the insurer. See Stadler v. Industrial Claim Appeals Office, 811 P.2d 447 (Colo.App. 1991). Thus, the insurance adjuster's testimony that it is her practice to verify wage information by direct contact with the employer provides substantial evidence concerning the reasonableness of the insurer's actions.
Neither does the claimant's reliance on federal minimum wage standards mandate a different result. As the ALJ recognized in his or oral remarks, calculation of the claimant's wage rate depends on the actual number of hours worked during any given pay period. (Tr. p. 35). At the time the insurer filed the admission of liability it was certainly not required to assume the claimant was consistently working 40 hours per week. Therefore, the insurer was not necessarily required to infer that either the employer was violating federal law, or the wage information was incorrect.
Insofar as the claimant made other arguments, they do not persuade us there was any error in the ALJ's denial of a penalty.
IT IS THEREFORE ORDERED that the ALJ's order dated June 22, 1999, and the corrected order dated July 15, 1999, are affirmed.
INDUSTRIAL CLAIM APPEALS PANEL
______________________________ David Cain
______________________________ Bill Whitacre
NOTICE
This Order is final unless an action to modify or vacate the 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, with service of a copy of the petition upon the Industrial Claim Appeals Office and all other parties, within twenty (20) days after the date the Order was mailed, pursuant to §§ 8-43-301(10) and 307, C.R.S. 1999.
Copies of this decision were mailed December 10, 1999 to the following parties:
Fernando R. Gallegos, 1238 Upham, Lakewood, CO 80215
Officemax Inc., 6791 W. Colfax, Lakewood, CO 80214-1807
Barbara Trefren-McDaniel, Travelers Property Casualty Co., P.O. Box 173762, Denver, CO 80217-3762
Jack Kintzele, Esq., 1317 Delaware St., Denver, CO 80204 (For Claimant)
Julie D. Swanberg, Esq., P.O. Box 5148, Denver, CO 80217-5148 (For Respondents)
BY: A. Pendroy