Opinion
W.C. No. 4-257-682.
September 10, 2003.
ORDER OF REMAND
The claimant seeks review of an order of Administrative Law Judge Felter (ALJ) which denied the claimant's request for imposition of penalties pursuant to § 8-43-304(1), C.R.S. 2002. The claimant contends that because the respondents violated a rule of procedure the ALJ erred in holding that penalties could only be assessed under § 8-43-401(2)(b), C.R.S. 2002 (8 percent penalty for willfully and wrongfully delaying or stopping medical payments). We set the order aside and remand for entry of a new order.
The ALJ found that claimant carries a cell phone which is medically necessary considering his condition. In the past, the insurer has paid cell phone charges without objection, although it did so on an irregular basis and not within the time limits established by the applicable rules. (Finding of Fact 6).
On October 2, 2002, October 23, 2002, and November 15, 2002, the claimant submitted requests for payment for three periods of cell phone charges. The ALJ found the insurer did not pay any of the cell phone charges until January 28, 2003, nor did it file a written notice contesting payment for these charges in accordance with Rule of Procedure XIV (K), 7 Code Colo. Reg., 1101-3 at 81-83.
The claimant requested imposition of penalties under § 8-43-304(1) based on the respondent-insurer's failure to comply with the "notice of contest" provisions of Rule XVI (K). In this regard, the ALJ found that the evidence demonstrated the insurer's failure to pay the cell phone charges in a timely fashion was "willful and wanton." Specifically, the ALJ found the insurer's conduct demonstrated "a pattern of delay" and that the respondents "will do things whenever they get around to doing them, regardless of the Division rules or the provisions of the Workers' Compensation Act." (Finding of Fact 19).
Nevertheless, the ALJ denied the request for imposition of penalties based on the insurer's violations of Rule XVI (K). The ALJ ruled that because the claims for penalties based on failure to pay the cell phone charges "concern non-payment of medical bills," the applicable penalty statute is § 8-43-401(2)(a), not § 8-43-304(1). Further, because the claimant did not plead § 8-43-401(2)(a) as the basis of the claims, the ALJ ruled the respondents were denied the opportunity to be heard and the claims should be dismissed.
On review, the claimant contends the ALJ's order denying the claim for penalties based on failure to comply with Rule XVI (K) is contrary to law. Specifically, the claimant argues that because the ALJ found violations of Rule XVI the ALJ necessarily found violations of a "lawful order" within the meaning of § 8-43-304(1). Under these circumstances, the claimant reasons that the mere fact that the insurer's conduct might be subject to penalties under § 8-43-401(2)(a) does not preclude the imposition of penalties under § 8-43-304(1). We agree with this argument.
In Holliday v. Bestop, Inc., 23 P.3d 700, 706-707 (Colo. 2001), the court held that § 8-43-304(1) divides conduct subject to penalties into four categories, and that the fourth category, failing, neglecting, or refusing to obey a lawful order, is subject to penalties under § 8-43-304(1) "even though penalties for such conduct are elsewhere specifically provided in the Workers' Compensation Act." The court's holding was based on its determination that the limiting phrase "for which no penalty has been specifically provided" applies to the third category of conduct [failing or refusing to perform any duty lawfully enjoined], but clearly does not apply to the fourth category. The court further observed that the structure of § 8-43-304(1) reflects that the General Assembly "considered the violation of a statutory provision or an administrative mandate to be a less egregious wrong than disregarding a tribunal's lawful order." Id. at 706.
An additional consequence of the Holliday decision was to overrule the so-called "gravamen test" exemplified by Sears v. Penrose Hospital, 942 P.2d 1345 (Colo.App. 1997). The gravamen test held that penalties are available under § 8-43-304(1) only when the Act does not create a specific penalty for the violation. Further, the gravamen test held that underlying acts or omissions which lead to a violation for which a specific penalty is imposed must be treated as encompassed within that violation. However, after Holliday, the gravamen test has been overruled "to the extent that it held that penalties under § 8-43-304(1) for failing, neglecting, or refusing to obey an order may not be imposed where the specific penalty in § 8-43-401(2)(a) is available." Giddings v. Industrial Claim Appeals Office, 39 P.3d 1211, 1215 (Colo.App. 2001). Further, where there is a violation of an order to pay medical benefits the ALJ has discretion to impose penalties under § 8-43-304(1) or § 8-43-401(2)(a). Giddings v. Industrial Claim Appeals Office, 39 P.3d at 1213.
We agree with the claimant that the ALJ's order reflects an improper application of the now discredited gravamen test. Section 8-40-201(15), C.R.S. 2002, defines the word "order" to include a "rule" or "regulation" arrived at by the Director of the Division of Workers' Compensation (Director). See Spracklin v. Industrial Claim Appeals Office, 66 P.3d 176 (Colo.App. 2002); Giddings v. Industrial Claim Appeals Office, 39 P.3d at 1214. Because the statute defines the term "order" to include a rule or regulation issued by the Director, violation of a rule of procedure is subject to penalties under § 8-43-304(1) regardless of whether the violation might also be punished under a statutory provision imposing a specific penalty. Holliday v. Industrial Claim Appeals Office, supra. Indeed, we are aware of at least two instances in which the Court of Appeals, after Holliday, remanded cases for consideration of the imposition of penalties under § 8-43-304(1), even though the "gravamen" of the misconduct involved the failure to pay medical benefits. See Brodeur v. Interstate Distributor Co., W.C. No. 4-383-624 (March 26, 2001), set aside in part and remanded, Brodeur v. Industrial Claim Appeals Office, (Colo.App. No. 01CA0635, December 6, 2001) (not selected for publication) (alleged violations of Rule XVI (I) and (J), concerning pre-authorization for medical treatment, could warrant imposition of penalties under § 8-43-304(1) despite the availability of specific penalty provided by § 8-43-401); Briscoe v. Denver Post, W.C. No. 4-217-926 (February 7, 2000), set aside and remanded, Briscoe v. Industrial Claim Appeals Office, (Colo.App. No. 00CA414, July 19, 2001) (not select for publication) (violation of Rule XVI (I) and (J) may warrant imposition of penalties under § 8-43-304).
The respondents rely on our decision in Pena v. Family Dollar Stores, Inc., W.C. No. 4-412-966 (February 11, 2003), as authority for a contrary result. However, Pena concerned an alleged violation of the Act itself, not violation of a rule of procedure or regulation of the Director. Hence, the issue in Pena was whether or not the limiting phrase "for which no penalty is specifically provided" applies to the first two categories of conduct (violation of the Act and performance of conduct prohibited by the Act), or only the third category. Pena is not concerned with violation of an "order" and is inapposite.
The respondents contend that even if the ALJ erred in concluding that § 8-43-304(1) is inapplicable, the ALJ's order may nevertheless be upheld because the claimant failed to prove any violation of Rule XVI (K). The respondents argue that under Rule XVI (K)(2) and Rule XVI (K)(3) there is no obligation to provide a "written notification" of the insurer's reasons for denying or delaying payment unless there is a "contest" of the insurer's liability for the medical bill. Applying the "plain meaning" of the word "contest," the respondents assert that no "contest" occurs unless the insurer "opposes, resists, or disputes" liability for the medical bill. The respondents argue that they never "contested" their liability for the cell phone charges, they merely delayed payment. Therefore, the respondents reason, the only penalty available is that provided by § 8-43-401(2)(a).
Neither party designated a transcript of the hearing. Under these circumstances, we must presume the ALJ's findings of fact are supported by substantial evidence in the record. Section 8-43-301(8), C.R.S. 2002; Nova v. Industrial Claim Appeals Office, 754 P.2d 800 (Colo.App. 1988).
Here, the ALJ expressly found the respondents' failure to pay the cell phone charges was "willful and wanton" and the product of a pattern of delay and evasion of the applicable Division rules. (Findings of Fact 6, 19, 20). Willful and wanton conduct connotes action which is the product of deliberate intent and extends beyond mere unreasonableness. Sears v. Penrose Hospital supra, overruled on other grounds, Holliday v. Bestop, Inc., supra.
Thus, the ALJ necessarily found that not only did the insurer "resist" payment of the medical bills in a timely fashion, it deliberately failed to disclose its intentions as required by Rule XVI (K). In fact the ALJ found that violation of the rule was "undisputed" at the hearing. (Finding of Fact 18). Consequently, under the respondents' own definition, they were "contesting" liability for payment by resisting timely payment. The reasons for the respondents' resistance may have been illegitimate, but they represented a "contest" nonetheless and did not excuse the respondents from complying with the rule.
Under these circumstances, the ALJ's order must be set aside insofar as it denied the imposition of penalties under § 8-43-304(1) based on the respondents' violation of Rule XVI (K). The matter is remanded to the ALJ for a determination of the amount of penalties to be imposed. We should not be understood as expressing any opinion concerning the amount of penalties as that is an issue within the sound discretion of the ALJ.
IT IS THEREFORE ORDERED that the ALJ's order dated June 4, 2003, is set aside insofar as it denied penalties under § 8-43-304(1) based on the respondents' violations of Rule XVI (K). On this issue, the matter is remanded for entry of a new order consistent with the views expressed herein. This order does not authorize an additional hearing, and the matter shall be determined on the existing record. However, either party may provide the ALJ with a transcript of the hearing if deemed necessary to assist the ALJ in recalling the evidence.
INDUSTRIAL CLAIM APPEALS PANEL
______________________________ David Cain
______________________________ Robert M. Socolofsky
Copies of this order were mailed to the parties at the addresses shown below on September 10, 2003 by A. Hurtado.
Kevin McOmber, 18964 E. Hawaii Dr., Aurora, CO 80017
Associated Business Products, c/o Scott M. Busser, Esq., 300 So. Jackson St., #570, Denver, CO 80209
Liberty Mutual Insurance Company, 10770 E. Briarwood Ave., #200, Englewood, CO 80112-3853
Ralph Ogden, Esq., 1750 Gilpin, Denver, CO 80218-1206 (For Claimant)
Scott M. Busser, Esq., 300 S. Jackson St., #570, Denver, CO 80209 (For Respondents)