Opinion
W.C. No. 4-374-856
June 22, 2000
FINAL ORDER
The respondents seek review of an order of Administrative Law Judge Friend (ALJ) which assessed penalties against the insurer for violation of Rule of Procedure IX (C) (1) (d), 7 Colo. Code Reg. 1101-3 at 34. The respondents argue the insurer may not be penalized for an unlawful termination of temporary disability benefits because the ALJ determined that such benefits are not owed. The respondents further contend the ALJ erred in failing to reduce the insurer's liability for penalties based on the claimant's post-injury earnings. We affirm.
The claimant sustained a compensable injury to her left upper extremity on March 4, 1998. Subsequently, the respondents admitted liability for temporary total disability benefits.
One of the claimant's treating physicians, Dr. Pohlman, placed the claimant at maximum medical improvement (MMI) on November 23, 1998. Subsequently, the claimant underwent a Division-sponsored independent medical examination (IME). The Division IME physician, who examined the claimant in June 1999, agreed with the treating physician's finding of MMI.
On February 18, 1999, the respondents filed a general admission of liability terminating the claimant's temporary total disability benefits effective January 11, 1999. The "Remarks" section of the admission contains the notation: "MODIFIED JOB OFFER SENT TO CLAIMANT 1/8/99." Subsequently, the claimant applied for a hearing on the issues of MMI, temporary disability benefits, and penalties under § 8-43-304(1), C.R.S. 1999, based on the insurer's violation of Rule IX (C) (1) (d) (concerning termination of temporary disability benefits based on an offer of modified employment).
After a discussion with counsel for the parties, the ALJ determined that the only issue ripe for consideration was the claim for penalties because the parties were not prepared to resolve the issues of temporary total disability benefits and MMI. With regard to penalties, the ALJ found the insurer violated Rule IX (C) (1) (d) because the admission of liability terminating temporary disability benefits was not accompanied by a certified letter or signed certificate of service showing that the offer of employment was delivered to the claimant, nor was the admission accompanied by a statement from an authorized treating physician showing that the offered employment was within the claimant's restrictions. The ALJ concluded the respondents offered no reasonable explanation for violation of the rule, and imposed penalties against the insurer in the amount of ten dollars per day from January 12, 1999, through July 21, 1999.
The ALJ also found the claimant earned "at least $65.00" worth of gasoline as compensation for part-time work as a cashier commencing in December 1998. The ALJ concluded that the claimant's receipt of the gasoline could serve to reduce a claim for temporary total disability benefits to temporary partial disability benefits. However, the ALJ did not award the "offset" sought by the respondents.
I.
On review, the respondents contend the ALJ's assessment of penalties was erroneous because the ALJ determined the claimant was not owed temporary total disability benefits during the period for which penalties were assessed. Specifically, the respondents argue the ALJ determined the claimant reached MMI on a November 23, 1998, as found by her authorized treating physician. The respondents further contend they were entitled to terminate the claimant's temporary disability benefits under § 8-42-105(3)(d)(I), C.R.S. 1999, because they made a valid offer of reemployment which the claimant refused to accept. We find no error.
Section 8-43-304(1) authorizes the imposition of penalties against an insurer which "does any act prohibited by, or fails or refuses to perform any duty lawfully enjoined within the time prescribed by the director or panel, for which no penalty has been specifically provided." Under this statute a penalty may be imposed for the violation of a rule of procedure. See Human Resource Co. v. Industrial Claim Appeals Office, 984 P.2d 1194 (Colo.App. 1999); Diversified Veterans Corporate Center v. Hewuse, 942 P.2d 1312 (Colo.App. 1997). However, the party seeking imposition of the penalty must establish that the violation of the rule was unreasonable in the sense that it was not predicated on a rational argument based in law or fact. Diversified Veterans Corporate Center v. Hewuse, supra.
The question of whether the violator has offered a rational argument for violation of the rule is one of fact for determination by the ALJ. Human Resource Co. v. Industrial Claim Appeals Office, supra. Thus, we must uphold the ALJ's resolution of the issue if supported by substantial evidence in the record. Section 8-43-301(8), C.R.S. 1999.
The respondents' first argument is that because the treating physician placed the claimant at MMI in November 1998, the insurer had a statutory basis for terminating temporary total disability benefits under § 8-42-105(3)(a), C.R.S. 1999. The respondents point out that the treating physician's determination of MMI occurred long before the termination of temporary disability benefits in January 1999. However, the respondents' argument misapprehends both the law and the effect of the ALJ's order.
Rule IX (C) (1) (a)-(f) concerns termination of "temporary disability benefits without a hearing." (Emphasis added). As such, Rule IX (C) creates special regulatory exceptions to § 8-43-203(2)(d), C.R.S. 1999, which provides that hearings may be set to determine any matter, "but, if any liability is admitted, payment shall continue according to admitted liability." The regulatory exceptions are necessary because the statute has been construed to prohibit respondents from unilaterally terminating admitted benefits without seeking a hearing to resolve disputed factual issues. See Monfort Transportation v. Industrial Claim Appeals Office, 942 P.2d 1358 (Colo.App. 1997); Snyder v. Industrial Claim Appeals Office, 942 P.2d 1337 (Colo.App. 1997); A R Concrete Construction v. Lightner, 759 P.2d 831 (Colo.App. 1998). Indeed, as stated in the Lightner decision, the mere fact that a physician has assigned a date of MMI does not, "in and of itself, mean that maximum medical improvement has indeed been attained." Id. at 833. Although Lightner was decided prior to the current statutory scheme for determining MMI, the current system still leaves the ultimate factual determination to the ALJ. Section 8-2-107 (8) (b) (III), C.R.S., 1999 (ALJ may determine if Division-IME's finding of MMI was overcome by clear and convincing evidence).
Because Rule IX permits the interruption or termination of the claimant's temporary benefits prior to a hearing, it has been held that the rule permissibly incorporates procedural requirements and safeguards not explicitly mandated by the Act itself. In Monfort Transportation v. Industrial Claim Appeals Office, supra, the court held that Rule IX (C) (1) (a) properly requires the respondents to "state a position on permanent disability benefits" contemporaneous with an admission terminating temporary disability benefits based on the treating physician's finding of MMI. The court concluded that the rule does not conflict or infringe on the respondents' rights under § 8-42-105(3)(a) because the attainment of MMI triggers the right to permanent disability benefits, and a unilateral termination of temporary benefits without an admission for permanent disability could result in an unwarranted interruption of compensation. Similarly, in Jyrkinen v. Peakload, Inc., W.C. No. 4-139-096 (June 15, 1994), we held that Rule IX (C) (1) (d) reasonably requires that an admission of liability terminating temporary disability benefits based on an offer of modified employment be filed with a certified letter to the claimant or copy of a written offer delivered to the claimant with a signed certificate of service. We reasoned that this requirement insures that respondents "are able to make an evidentiary showing which demonstrates a high degree of probability that they will succeed" on the merits when the issue of termination under § 8-42-105(3)(d) is finally heard by an ALJ.
Applying these principles here, we find no error in the ALJ's conclusion that the claimant's alleged attainment of MMI in November 1998 does not provide a reasonable basis for the respondents' failure to comply with Rule IX (C) (1) (d) when they terminated benefits effective January 11, 1999. First, the ALJ did not find that the claimant was at MMI, or that his right to temporary total disability benefits should be terminated in November 1998. The ALJ merely determined that Dr. Pohlman was an authorized physician. The ultimate questions concerning whether or not the claimant reached MMI, and whether the claimant is entitled to temporary disability benefits after November 1998, were explicitly reserved for future determination. (Specific Findings of Fact, Conclusions of Law, and Order, paragraph 1 p. 2). Thus, the claimant's alleged attainment of MMI remains a factual issue to be determined in accordance with the IME procedures of § 8-42-107(8)(b), and the mere assertion the claimant reached MMI did not justify a unilateral termination of benefits. A R Concrete v. Lightner, supra. Moreover, the respondents did not establish a basis for unilateral termination of benefits based on Rule IX (C) (1) (a). Indeed, as the ALJ noted, it appears the insurer "could not have complied with [Rule IX (C) (1) (a)] because it did not have an impairment rating from the physician." Monfort Transportation, v. Industrial Claim Appeals Office, supra.
It follows that this is not a case in which the ALJ assessed penalties for an improper termination of benefits when the benefits were found not to be due and owing. Indeed, the claimant's ultimate entitlement to temporary disability benefits remains to be determined. In any event, the respondents are being penalized for their failure to adhere to specific regulatory requirements designed to protect against unwarranted terminations of temporary disability benefits. Even if it is ultimately determined that the claimant is not entitled to the temporary benefits, the respondents still violated Rule IX (C) (1) (d). The rule does not require that the claimant suffer actual prejudice from the violation in order to warrant the imposition of penalties.
For similar reasons, we reject the respondents' contention that the insurer's violation of Rule IX (C) (1) (d), by failure to provide notice of proper service of the offer of employment, and the failure to attach a physician's report, may be excused because the offer of employment was sufficient to terminate benefits under § 8-42-105(3)(d) (I), and Laurel Manor Care Center v. Industrial Claim Appeals Office, 964 P.2d 589 (Colo.App. 1998). Again, the ultimate factual issues underlying the sufficiency of the offer of employment, and the claimant's release to modified employment, were not before the ALJ, and were not adjudicated. Consequently, the insurer's right to file an admission of liability unilaterally terminating the claimant's benefits was conditioned upon compliance with the special procedural requirements of Rule IX (C) (1) (d). In light of the long-established case law cited above, we agree with the ALJ that the respondents presented no rational argument, either factual or legal, which could rationalize the insurer's failure to comply with the rule. Jyrkinen v. Peakload, Inc., supra.
II.
The respondents next contend the ALJ erred in failing to "offset" the claimant's post- injury earnings against the award of penalties. Although the respondents' brief cites no legal authority for such an offset, at the time of the hearing the respondents relied on § 8-43-304(2), C.R.S. 1999. (Tr. pp. 24-25). That statute authorizes an "offset of previously paid workers' compensation benefits or payments" against future workers' compensation benefits or payments when "the worker admits to having obtained the previously paid benefits or payments through fraud, or a civil judgment or criminal conviction is entered against the worker for having obtained the previously paid benefits through fraud."
Initially, we note that the claimant's post injury earnings do not constitute "previously paid workers' compensation benefits or payments." In any event, the record contains no admission by the claimant that she obtained any benefits through fraud, nor is there any evidence of a civil judgment or criminal conviction against the claimant. Consequently, we perceive no error in the ALJ's refusal to award an "offset," and conclude that he properly viewed the post-injury earnings as a potential reduction of temporary total disability benefits to temporary partial disability benefits. Section 8-42-106(1), C.R.S. 1999.
IT IS THEREFORE ORDERED that the ALJ's order dated September 15, 1999, is affirmed.
INDUSTRIAL CLAIM APPEALS PANEL
____________________________________ David Cain
____________________________________ Robert M. Socolofsky
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, CO 80203, by filing a petition for review with the Court, within twenty (20) days after the date this Order is mailed, pursuant to § 8-43-301(10) and § 8-43-307, C.R.S. 1999. 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 decision were mailed June 22, 2000 to the following parties:
Victoria Martinez, 717 Ash, Julesburg, CO 80737
Flying J Inc., 50 W. 990 S., Brigham City, UT 84302-3121
Zurich Insurance Company, P. O. Box 20048, Kansas City, MO 64195
Cara Thompson, Risk Enterprise Management, P. O. Box 600, Brea, CA 92622
Special Funds Unit, Division of Workers' Compensation — Interagency Mail
John M. Connell, Esq., and Daniel Teodoru, Esq., 1675 Larimer St., #710, Denver, CO 80202 (For Claimant)
Anne Smith Myers, Esq., and Benjamin E. Tracy, Esq., 3900 E. Mexico, #1000, Denver, CO 80210 (For Respondents)
BY: A. Pendroy