Opinion
W.C. No. 3-942-960
December 14, 1998
FINAL ORDER
The claimant seeks review of an order of Administrative Law Judge Wheelock (ALJ) insofar as the ALJ denied the request for penalties. We affirm.
The claimant suffered a work-related injury on April 6, 1989. On June 12, 1989, the Colorado Compensation Insurance Authority (CCIA) filed a General Admission of Liability for temporary total disability benefits based upon an average weekly wage of $146.25. At the time of the injury the claimant had concurrent earnings of $37.39 per week. However, the CCIA refused to file an amended admission to include the concurrent earnings.
In August 1997, the claimant filed an Application for Hearing and requested penalties for the CCIA's failure to admit liability based on the concurrent earnings. At the commencement of a hearing on December 3, 1997, the respondents stipulated to an average weekly wage of $183.64, inclusive of the concurrent earnings. The ALJ ordered the respondents to pay temporary disability benefits based upon the higher average weekly wage, plus interest on the unpaid benefits.
The ALJ also determined that by November 29, 1989, the CCIA knew the claimant had concurrent earnings at the time of the injury. However, the ALJ determined the claimant failed to prove the CCIA had an express "legal duty" under the Workers' Compensation Act (Act) to admit liability for the higher average weekly wage. Therefore, relying on Allison v. Industrial Claim Appeals Office, 916 P.2d 623 (Colo.App. 1995), the ALJ determined that the CCIA's failure to include the claimant's concurrent earnings was insufficient to impose penalties under former § 8-53-116, C.R.S. (1986 Repl. Vol. 3B). The ALJ also declined to impose penalties based upon the CCIA's violation of an implied duty of "good faith."
I.
On review, the claimant first contends the ALJ erred in finding there was no violation of an express statutory duty. We perceive no error.
Former § 8-43-116 [currently codified with changes at § 8-43-304(1), C.R.S. 1998] provides for the imposition of a penalty where an insurer;
"[V]iolates any provision of articles 40 to 47 of this title, or does any act prohibited thereby, or fails or refuses to perform any duty lawfully enjoined within the time prescribed by the director or panel."
In Allison v. Industrial Claim Appeals Office, supra, the respondents filed an admission of liability for temporary total disability benefits, but reduced the weekly disability payment based upon an asserted offset for the claimant's receipt of proceeds from a structured settlement. The claimant sought penalties for the respondents' withholding of the full weekly benefit. However, the court concluded that the temporary total disability statute does not create an express duty to pay benefits without regard to any applicable offsets. Therefore, the Allison court held that the claimant failed to establish a violation of the Act which would subject the respondents to a penalty under § 8-43-304(1).
As argued by the claimant, former § 8-47-101(2), C.R.S. (1986 Repl. Vol. 3B) [currently codified with changes at § 8-42-102, C.R.S. 1998], provides that the term wages "shall" mean the money rate services are recompensed at the time of the injury. Former § 8-52-102 [currently codified with changes at § 8-42-105(1), C.R.S. 1998], provides that temporary total disability benefits "shall" be paid sixty-six and two-thirds percent of the average weekly wage. Furthermore, we agree that St. Mary's Church Mission v. Industrial Commission, 735 P.2d 902 (Colo.App. 1986), stands for the proposition that the claimant's average weekly wage should usually include concurrent earnings. However, we do not agree that the respondents have any express statutory duty to admit liability for an average weekly wage which includes concurrent earnings.
To the contrary, the respondents have no statutory duty under the Act to admit liability. Section 8-43-203(1), C.R.S. 1998 [formerly § 8-53-102(1), C.R.S. (1986 Repl. Vol. 3B)], gives the respondents the option to admit or deny liability and demand that the claimant establish her entitlement to benefits. Further, the Act imposes on the claimant the burden to prove her entitlement to benefits. Section 8-43-201 C.R.S. 1998. In this regard, we note that the mere existence of concurrent wages does not always require the inclusion of such wages in the average weekly wage. See Jefferson County Public Schools v. Dragoo, 765 P.2d 636 (Colo.App. 1988) (may be appropriate to disallow compensation for multiple wage losses "in certain circumstances").
Moreover, where the respondents admit liability, they are only required to pay "according to admitted liability." Section 8-43-203(d), C.R.S. 1998. Thus, we reject the claimant's contention that if a respondent admits liability, the amount of the admitted liability must be correct to avoid penalties.
Nevertheless, the claimant argues that the CCIA is liable for penalties commencing April 1997. In support, the claimant relies on the testimony of the CCIA's adjuster who stated that she knew in April 1997 the claimant's average weekly wage was wrong and should be increased. (Tr. p. 33) The claimant contends that this testimony constitutes an "admission" of liability, and thus, the CCIA was expressly required to pay benefits in accordance with the admitted liability. Again we disagree.
Section 8-43-203 defines an admission of liability as a written statement from the insurer. The testimony of the CCIA's adjuster does not meet that definition. Rather, the adjuster's testimony only reflects what she knew about the claim in April 1997, and what she thought should be done. Moreover, as stated above, the respondents have no express duty to admit for any liability. Consequently, the adjustor's belief that the admission should be amended does not compel a finding that the CCIA violated a provision of the Act.
II.
Next, the claimant contends the ALJ erred in finding that penalties may not be imposed in the absence of a violation of an express statutory duty. The claimant contends that the Supreme Court found implied duties in Eckhardt v. Village Inn, 826 P.2d 855 (Colo. 1992) (implied rule of "reasonable refusal" requires insurer to make good faith appraisal of case in determining whether to withhold consent to third-party lawsuit); County Workers Compensation Pool v. Davis, 817 P.2d 521 (Colo. 1991) (implicit rule of apportionment of attorney fees and costs); and In re the Matter of Peterkin, 729 P.2d 977 (Colo. 1986) (implicit rule of forfeiture where claimant fails to obtain insurer's consent to third-party settlement). The claimant also points out that in Scott Wetzel Services Inc. v. Johnson, 821 P.2d 804 (Colo. 1991), the court found an implied duty of good faith and fair dealing owed by independent adjusting agencies to workers' compensation claimants. The claimant contends that the CCIA's violation of this implied duty warrants the imposition of penalties under § 8-43-304(1). We disagree.
Every insurance contract in workers' compensation contains an implied covenant of good faith and fair dealing. Vaughn v. McMinn, 945 P.2d 404 (Colo . 1997); Farmers Group, Inc. v. Trimble, 691 P.2d 1138 (Colo. 1984). In Travelers Insurance Co. v. Savio, 706 P.2d 1258, 1270 (Colo. 1985), and again in Vaughn v. McMinn, supra, the court concluded that the duty of an insurer to adjust claims in good faith derives from the insurance contract itself and not any provision of the Act. These decisions also hold that injuries from the insurer's bad faith processing of the claim are beyond the scope of the Act. Therefore, they reject the argument that § 8-43-304(1) is the sole statutory remedy for all injury or damages arising from an insurer's conduct in adjusting a workers' compensation claim.
We conclude that Savio and McMinn are dispositive of the claimant's argument, and therefore, we need not consider the cases cited by the claimant. See CCIA v. Baker, 955 P.2d 86 (Colo.App. 1998). Furthermore, Savio compels the conclusion that § 8-43-304(1) does not purport to create a remedy for an insurer's violation of the duty of good faith. See Villa v. Wayne Gomez Demolition Excavating, Inc., W.C. No. 4-236-951 (January 7, 1997). Consequently, the ALJ did not err in refusing to impose a penalty under § 8-43-304(1) for the CCIA's failure to admit liability for a higher average weekly wage.
Nevertheless, the claimant contends that Act is intended to produce a just and reasonable result. The claimant contends that this objective is served by construing the phrase failure to "perform any duty lawfully enjoined" to include a violation of an implied duty to adjust claims in good faith. We are not persuaded.
One of the legislative objectives of the Act is to ensure that benefits are delivered at a "reasonable cost to the employer." Section 8-40-102(1), C.R.S. 1998. As we stated in Villa, the imposition of penalties for the violation of an implied duty of good faith would promote penalty litigation concerning numerous actions or inactions, and thereby increase costs to employers. Therefore, the claimant's construction is contrary to at least one objective of the Act.
We also noted in Villa that § 8-43-304(1) already provides a standard of conduct. The statute provides for the imposition of a penalty where the insurer violates the Act and the violation is objectively unreasonable. See Colorado Compensation Insurance Authority v. Industrial Claim Appeals Office, 907 P.2d 676 (Colo.App. 1995). It would be illogical to conclude that the General Assembly also intended to subject insurers to penalties under an undefined standard due to the violation of an implied duty.
Finally, the civil courts afford a remedy for bad faith adjustment of claims. It is doubtful that the General Assembly intended two punishments, at least where there is no violation of an express provision of the Act or rules.
IT IS THEREFORE ORDERED that the ALJ's order dated January 28, 1998, is affirmed
INDUSTRIAL CLAIM APPEALS PANEL
____________________________________ David Cain
____________________________________ Kathy E. Dean
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, 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 this Order is mailed, pursuant to section 8-43-301(10) and 307, C.R.S. 1998.
Copies of this decision were mailed December 14, 1998 to the following parties:
Donna Sanchez, 916 Alexander Circle, Pueblo, CO 81001
Pueblo Medical Investors Ltd., 945 Desert Flower Blvd., Pueblo, CO 81001-1148
Colorado Compensation Insurance Authority, Interagency mail
Steven U Mullens, P.C., Steven U. Mullens, Esq., 1401 Court Street, Pueblo, CO 81003 (For Claimant)
Timothy L. Nemechek, Esq., 999 18th Street, Suite 3100, Denver, CO 80202 (For Respondents)
BY: ____________