Opinion
W.C. No. 4-520-251.
October 12, 2004.
FINAL ORDER
The respondents seek review of an order of Administrative Law Judge Klein (ALJ) that failed to impose a 50 percent reduction in nonmedical benefits under § 8-42-112.5, C.R.S. 2003 (injury caused by use of controlled substance). The respondents further contend the ALJ erred in imposing penalties under § 8-43-304(1), C.R.S. 2003, for an improper modification of temporary total disability (TTD) benefits in violation of Rule IX (D), 7 Code Colo. Reg. 1101-3 at 35. The claimant also seeks review of the order, contending the ALJ erred in calculating the period for which the penalty should be imposed, and disputing the ALJ's determination that the cost of COBRA benefits should be not be included in the average weekly wage (AWW). We affirm the order insofar as it does not reduce the claimant's compensation based on drug usage and does not include COBRA costs in the claimant's AWW. We set the order aside with respect to the imposition of penalties and remand for further proceedings on this issue.
The claimant sustained serious head injuries on October 21, 2001, when he rolled a truck in a Wyoming highway accident. In November 2001, the respondents filed a General Admission of Liability (GAL) for TTD benefits.
On May 23, 2002, the respondents filed a Petition to Modify, Terminate or Suspend Compensation (the petition). The petition cited § 8-42-112.5, and alleged the claimant was "under the influence of a controlled substance at the time of the accident." The petition was served on the claimant's first attorney (Litten), but not on the claimant. The petition was not accompanied by any documentation, although the petition listed a Wyoming state trooper and a "representative of Wyoming Chemical Testing" as potential witnesses.
Attorney Litten did not respond to the petition and on June 18, 2002, a claims manager for the Division of Workers' Compensation (DOWC) sent a letter to the insurer authorizing it to reduce the claimant's compensation as of the date the petition was filed because there had been no response. The claimant's wife testified that she received a copy of this letter and it was her first notice of the petition. She then terminated Litten's services and retained a second attorney (Christian). (Tr. pp. 51-52; Finding of Fact 18).
On June 28, 2002, the insurer filed a GAL that claimed the reduction in compensation commencing May 23. The GAL reflects it was mailed to the claimant. In July 2002, attorney Christian objected to the FAL and requested an expedited hearing to reinstate the TTD benefits. The claimant's wife testified she believed Christian filed documents to "try to turn this thing around." However, no further proceedings occurred until December 2003, when the claimant's current attorney filed an application for hearing.
On May 18, 2004, the matter proceeded to hearing on various issues, including the claimant's assertion that the respondents violated Rule IX (D) by failing to serve the petition on the claimant and by failing to attach all documents on which the petition was based. The claimant also contended that the AWW should include the cost of COBRA benefits, even though he did not pay for such benefits. The respondents argued the claimant's benefits should be reduced by 50 percent because the accident was caused by the use of marijuana.
The ALJ found the respondents violated Rule IX (D)(2) because they failed to serve the petition on the claimant, and violated Rule IX (D)(1) because they failed to attach copies of toxicology reports on which the petition was based. The ALJ imposed penalties of $250 per day from January 12, 2004 (20 days after the claimant's application for hearing) until May 18, 2004, the date of the hearing. In so doing the ALJ found the respondents offered no evidence that they "cured" the violations. The ALJ further rejected the respondents' contention that the penalty claims are barred by the one-year statute of limitations contained in § 8-43-304(5), C.R.S. 2003. The ALJ first found that because of the disability caused by the injury, the claimant was not capable of "independent knowledge of the underlying facts giving rise" to the penalties. The ALJ also found that because of the "negligence" of the claimant's first two attorneys, he was not "advised of the factual allegations" giving rise to the penalties until he retained current counsel. The ALJ finally concluded that the statute of limitations argument failed because the claimant was not given actual notice of the petition as required by the rule.
The ALJ denied the claimant's request for inclusion of the cost of COBRA benefits in the AWW because the claimant "did not actually tender payment for the continuance of COBRA benefits."
I.
On review, the respondents first contend they did not violate Rule IX (D)(1); therefore, they assert no penalties may be imposed under § 8-43-304(1). The respondents cite Rule of Procedure II (A)(2), 7 Code Colo. Reg. 1101-3 at 2, which states that the term "claimant" includes the "claimant's legal representative" for notice and procedural purposes. Consequently, the respondents reason that service of the petition on attorney Litten was sufficient to comply with Rule IX (D)(2). The respondents also argue that the petition was not based on toxicology reports, so they did not violate Rule IX (D)(1). We are not persuaded.
Penalties may be imposed under § 8-43-304(1), C.R.S. 2003, for violation of an "order." An order includes a rule adopted by the Director of the DOWC. Spracklin v. Industrial Claim Appeals Office, 66 P.3d 176 (Colo.App. 2002).
The principles governing the interpretation of administrative regulations are the same as those concerning statutes. Gerrity Oil and Gas Corp. v. Magness, 923 P.2d 261 (Colo.App. 1995), aff'd. in part, rev'd. in part on other grounds, 946 P.2d 913 (Colo. 1997). Thus, the overall objective is to interpret the rules in a manner which effects the Director's intent. Because the language used is the best indicator of intent, the rules should be given their plain and ordinary meanings unless the result is absurd. Further, the rules should be read to give a consistent, harmonious and sensible effect to all their parts. Spracklin v. Industrial Claim Appeals Office, supra. If there is a conflict between rules, a specific provision prevails over a general provision unless the general rule was enacted later in time and there is a clear intent that the general provision prevail. See Freemyer v. Industrial Claim Appeals Office, 32 P.3d 564 (Colo.App. 2000).
Rule IX (D)(2) provides that a petition to suspend or modify benefits "shall be mailed with a copy to the claimant and claimant's attorney." We agree with the claimant and ALJ that the purpose of this provision is to provide notice to both the claimant and the claimant's lawyer of a pending request for the reduction of benefits so that both may take appropriate action to defend against the request. See Hall v. Home Furniture Co., 724 P.2d 94 (Colo.App. 1986). Moreover the plain language of Rule IX (D)(2) expressly requires that both the claimant and attorney be served, and we may not abrogate that requirement. See Adolph Coors Co. v. Charnes, 690 P.2d 893 (Colo.App. 1984), aff'd., Department of Revenue v. Adolph Coors Co., 724 P.2d 1341 (Colo. 1986); Meskimen v. FFE Transportation, W.C. No. 3-966-629 (March 31, 2003).
The respondents' assertion notwithstanding, we do not consider Rule II (A)(2) as inconsistent with this conclusion. Rule II (A)(2) merely states that for purposes of notification and pleadings, the term claimant "shall include the claimant's legal representative." In our view, this rule applies where the term "claimant" appears in the rules without any reference to the claimant's attorney. For instance, Rule IX (D)(3) states that if the "claimant does not file a written objection" to a petition to suspend within 20 days, the insurer may suspend benefits as of the date of the petition. Thus, Under Rule II (A)(2), the reference to an "objection" filed by the claimant would also contemplate an objection filed by the claimant's attorney. However, where a rule specifically mentions both the claimant and the claimant's attorney, the specific provisions of the rule should be construed as referring to both the claimant and the attorney. This is particularly true in Rule IX because subsection (D)(2) refers to the "claimant and claimant's attorney," while (D)(3) refers only to the claimant.
Neither do we consider the June 18 letter from the DOWC as a ruling that the petition was procedurally proper. The letter merely states that because there was no objection filed, the respondents may suspend benefits. It does not purport to be an adjudication of the sufficiency of the petition.
The respondents also contend there was no violation of Rule IX (D)(2) because the petition to suspend benefits was based on evidence that a bag of marijuana was found at the scene of the accident and a purported "oral admission" of the claimant. The respondents argue that these items do not constitute "documentation" which could be attached to the petition. This argument is not persuasive.
Rule IX (D)(1) provides that "all documentation upon which the petition is based shall be attached to the petition." The petition filed by the respondents cites § 8-42-112.5 as the legal basis for the modification of TTD benefits, and identifies a representative of "Wyoming Chemical Testing" as a witness. At hearing, the respondents asserted, as they still do, that the presumptions of intoxication and causation created by § 8-42-112.5 apply. Indeed, the respondents introduced several toxicology reports generated at or near the time of the accident as the basis for invoking the statutory presumption. (Respondents' Exhibit C).
As the ALJ found, a toxicology report existed at the time the respondents filed their petition to suspend, and the record reveals this report was generated by the Wyoming Department of Health "chemical testing program." (Conclusion of Law 9; Claimant's Exhibit 7). In light of this evidence, the ALJ logically inferred from the petition that the respondents were fully aware of the toxicology report, and that it formed a substantial basis for the petition to suspend. Indeed, evidence of a "forensic drug or alcohol test" performed by a licensed or certified facility is an prerequisite to establishing the presumptions created by § 8-42-112.5. The mere fact that some other types of evidence existed which would also support the petition did not absolve the respondents of the responsibility to attach relevant documents which were in their possession.
Th respondents reliance on Martinez v. Cedar Ridge Landscaping, W.C. No. 4-400-570 (August 6, 2003), is inapposite. That case concerned the issue of whether the claimant waived the right to contest a defect in a final admission of liability (FAL) where the claimant challenged the FAL by requesting a division independent medical examination. Here, the respondents cite no evidence that the claimant engaged in any conduct so inconsistent with assertion of the claim for penalties that we can say the claimant waived penalties. See Johnson v. Industrial Commission, 761 P.2d 1140, 1147 (Colo. 1988).
II.
The respondents contend they "cured" the defects in the petition to modify because prior to the hearing, the claimant received notice that the respondents filed the petition and also received copies of the toxicology reports. See § 8-43-304(4), C.R.S. 2004. However, the violation was filing the petition without serving the claimant and attaching the necessary documentation, and then reducing the claimant's benefits based on the defective petition. We agree with the ALJ that the respondents never cured these violations of the rules by subsequently filing a proper petition to modify TTD benefits and retroactively restoring the wrongfully withheld benefits.
III.
The respondents contend the ALJ erred in failing to find that the claim for penalties is barred by the statute of limitations contained in § 8-43-304(5), C.R.S. 2003. The respondents contend the claimant, as a reasonable person, knew or should have known of the claims giving rise to the penalties no later than July 2002, after his wife received the DOWC letter, the respondents filed the June 2002 GAL reducing the claimant's compensation, and after attorney Christian filed an objection to the GAL. We remand for entry of a new order on this issue.
Section 8-43-304(5) requires that a request for penalties be filed with the ALJ "within one year after the date that the requesting party first knew or reasonably should have known the facts giving rise to a possible penalty." This is a statute of limitations designed to ensure prompt litigation of penalty claims once the "underlying violation is first discovered." Spracklin v. Industrial Claim Appeals Office, 66 P.3d at 177.
The ALJ found the claimant could not reasonably have known of the violations because of the mental disability caused by the industrial head injury. This conclusion appears to constitute a determination that the claimant was incompetent to understand the claims, and therefore, the statute of limitations was tolled by the claimant's incapacity. However, a workers' compensation proceeding is not the proper forum to determine whether the claimant was incompetent so as to toll the statute of limitations. See James v. Brookhardt Lumber Co., 727 P.2d 1119 (Colo.App. 1986); § 13-81-103(1)(a), C.R.S. 2003. In this regard, we are aware of no statute which grants an ALJ jurisdiction to determine the competency of a person for purposes of tolling a statute of limitations. See § 8-43-207(1)(m), C.R.S. 2003 (ALJ has jurisdiction to determine the competency of a witness and competency of person to enter into a settlement agreement). In reaching this result, we should not be understood as prohibiting the claimant from seeking a competency determination in the appropriate forum and then establishing that his disability tolled the statute of limitations contained in § 8-43-304(5). James v. Brookhardt Lumber Co., supra.
The respondents next contend there is no evidence to support the finding that the "negligence" of the claimant's first two attorneys caused him to be unaware of the facts giving rise to the claims for penalties. The claimant responds that there is no evidence that either of the claimant's first two attorney advised the claimant or his wife of potential claims for penalties based on violation of the requirements of Rule IX (D)(1) and (2). Because we conclude that the negligence of the claimant's attorneys would not toll the running of the statute of limitations, we remand for further findings on this issue.
The statute of limitations requires that if a party knows or reasonably should know of facts giving rise to a possible claim for penalties, a request for penalties must be filed within one year. However, ignorance of the law does not prevent the statute of limitations from running. This is true because parties seeking benefits under a statutory scheme are presumed to know the law and may not set up ignorance as a defense to such knowledge. See Paul v. Industrial Commission, 632 P.2d 638 (Colo.App. 1981); 7 Larson's Workers' Compensation Law, § 126.09[3] (discussing principle in context of statute of limitations for filing claim for benefits). Moreover, negligence of counsel is imputed to the claimant because the attorney is the claimant's agent. 7 Larson's Workers' Compensation Law, § 126.09[4]. It is true that in Colorado, an attorney's negligence may provide a "reasonable excuse" for late filing of a claim for benefits, but the statute of limitations contained in § 8-43-304(5) does not contain any "reasonable excuse" provision like that in § 8-43-103(2), C.R.S. 2003. See State Compensation Insurance Fund v. Foulds, 167 Colo. 123, 445 P.2d 716 (1968).
Applying these principles here, we do not understand the basis for the ALJ's conclusion that the alleged "negligence" of the claimant's first two attorneys tolled the statute of limitations. Insofar as the ALJ concluded that the claimant did not know about the provisions of Rule IX, the ALJ's order is insufficient to award penalties. The claimant is presumed to know the legal provisions of Rule IX, and the question is whether he received factual information sufficient to suggest that the rule had been violated and, if so, when. Moreover, the negligence of the claimant's attorneys is imputed to the claimant, and he may not rely on such negligence as a basis for failing to file a claim for penalties within the applicable time frame.
Finally, we disagree with the ALJ's conclusion that merely because the respondents did not serve the petition on the claimant, they are prohibited from relying on the statute of limitations in defense of the penalty claim. As noted, the issue is when the claimant knew or should have known facts indicating that the respondents violated Rule IX by failing to serve the petition and by failing to attach the required documents. The mere fact that the respondents did not serve the claimant with the petition did not prevent the claimant from learning, through other sources, that his benefits had been modified by a petition filed by the respondents, and that the petition was defective. Indeed, a cursory examination of the petition, apparently served on attorney Litten, would reveal that it was not served on the claimant and that no documentation was attached. Because this information may be imputed to the claimant through attorney Litten, the ALJ could find the claimant knew or reasonably should have known facts indicating a violation of Rule IX. This is particularly true since the claimant's wife was aware from the DOWC letter that the TTD benefits had been modified based on a petition to suspend benefits.
It follows that the matter must be remanded to the ALJ for entry of a new order on the statute of limitations defense raised by the respondents. The ALJ may, in the exercise of his discretion, defer his ruling pending completion of proceedings to establish the claimant's competence. Any order entered shall be consistent with the principles discussed herein.
IV.
The claimant argues that the ALJ erred in assessing penalties commencing 20 days after the date of the application for hearing. Because this issue might arise on remand, we choose to address it here.
The ALJ determined the penalties should commence 20 days after the application for hearing was filed. This determination was apparently based on the ALJ's conclusion that because § 8-43-304(4) grants the respondents 20 days to cure a violation, no violation occurs until the 20 days elapses. We disagree with this interpretation.
A violation of an order occurs when a party authorized or obligated to perform does an action prohibited by the order, or fails to take an action required by the order. See Dworkin, Chambers Williams, P.C. v. Provo, 81 P.3d 1053, 1058 (Colo. 2003). Once a violation occurs, each subsequent day that the violation continues constitutes a separate violation which may be joined with the first for purposes of adjudicating the violator's total liability for penalties. Spracklin v. Industrial Claim Appeals Office, 66 P.3d at 177-178. Thus, a violation occurs and is subject to penalties from the day the improper conduct occurs.
The "cure" statute does not affect the date on which a penalty commences. Section 8-43-304(4) states that if a party cures a violation within the time limit, and the "party seeking such penalty fails to prove by clear and convincing evidence that the alleged violator knew or reasonably should have known such person was in violation, no penalty shall be assessed." Thus, the cure statute adds an element of proof to a claim for penalties in cases where a cure is proven. In the ordinary case, it is not necessary for the party seeking penalties to prove that the violator knew or reasonably should have known they were in violation. All that is necessary is that the party seeking penalties prove the putative violator acted unreasonably under an objective standard. See Jiminez v. Industrial Claim Appeals Office, ___ P.3d ___ (Colo.App. No. 02CA2283, September 11, 2003); Pueblo School District No. 70 v. Toth, 924 P.2d 1094 (Colo.App. 1996). Section 8-43-304(4) modifies this rule and adds an extra element of proof when a cure has been effected. Specifically, the party seeking penalties must prove the violator had actual or constructive knowledge that its conduct was unreasonable. Diversified Veterans Corporate Center v. Hewuse, 942 P.2d 1312 (Colo.App. 1997).
It follows that if the ALJ assesses penalties on remand, the penalties shall run from the date the violation first occurred. The cure provision has no effect on this date, it merely changes the elements of proof necessary to establish a violation.
V.
The respondents next contend the ALJ erred in failing to order a 50 percent reduction in compensation under § 8-42-112.5. The respondents argue that they established a presumption that the claimant was intoxicated and that this was the cause of the accident. We disagree.
Initially, we note the ALJ did not specifically address this issue. However, we agree with the claimant that there is no evidence that the toxicology reports were issued by a facility "licensed or certified" to conduct forensic drug tests. Neither did the respondents establish that a sample was preserved for a test to be conducted at the claimant's request.
These requirements of § 8-42-112.5 are safeguards designed to protect the claimant from unwarranted reductions in compensation, and their existence must be established before the presumption applies. Arenas v. Industrial Claim Appeals Office, 8 P.3d 558 (Colo.App. 2000). Further, as the party seeking to impose a penalty on the claimant, the respondents had the burden of proof to establish the predicates for application of the presumption. See Lori's Family Dining, Inc. v. Industrial Claim Appeals Office, 907 P.2d 715 (Colo.App. 1995).
The respondents have attached to their brief a Wyoming statute purporting to establish that the Wyoming Department of Health was "certified" to conduct forensic drug tests. However, we may not take notice of attachments to briefs which were not made part of the record at the time of the hearing. Subsequent Injury Fund v. Gallegos, 746 P.2d 71 (Colo.App. 1987). Neither does the record indicate the ALJ was asked to take notice of this foreign statute. In any event, there was no showing that a duplicate sample was preserved and available for the claimant's testing. Thus, there is no basis for reduction of the claimant's compensation under § 8-42-112.5.
VI.
The claimant contends the ALJ erred in failing to increase his AWW to include the cost of COBRA coverage, even though the claimant did not pay for the COBRA coverage. In two recent decisions, we rejected the claimant's arguments and held that Midboe v. Industrial Claim Appeals Office, 88 P.3d 643 (Colo.App. 2003), requires a claimant to purchase continuing coverage in order to have the cost of COBRA included in the AWW. See Ashmore v. Nu Horizon Window Systems, Inc., W.C. No. 4-593-027 (August 25, 2004); Marsh v. Sunnyrest Health Care, W.C. No. 4-536-309 (April 23, 2004). The decisions in Ashmore and Marsh address the claimant's arguments, and the holdings in those cases are adopted herein as if fully set forth. Thus, we uphold the ALJ's order on the AWW issue. To the extent the claimant asserts he made COBRA payments, Exhibit 12 supports the ALJ's finding that he did not.
IT IS THEREFORE ORDERED that the ALJ's order dated June 2, 2004, is set aside insofar as it assessed penalties for violation of Rule IX. On this issue, the matter is remanded for further proceedings and entry of a new order consistent with the views expressed herein.
IT IS FURTHER ORDERED that in all other respects the ALJ's order is affirmed.
INDUSTRIAL CLAIM APPEALS PANEL
______________________________ David Cain
______________________________ Dona Halsey
Carnell Ray, Denver, CO, New World Van Lines of Colorado, Chicago, IL, Jody Estep, Liberty Mutual Fire Insurance, Peoria, IL, Kat Pennucci, Special Funds Unit, Division of Workers' Compensation — Interagency Mail, Jennifer E. Bisset, Esq., Denver, CO, (For Claimant).
David G. Kroll, Esq., Denver, CO, (For Respondents).